Real estate may offer stability, but liquid financial assets give the next generation the flexibility to adapt to changing life goals.

This is a monthly column in Mint by Priya Sunder, Director and Co-founder of PeakAlpha.

Twenty years ago, Nina and Saurabh Joshi returned to India after living abroad for many years. In their early thirties and raising two young children, they began planning for the family’s future.

They bought two apartments in addition to the home they lived in. Their reasoning was simple: one property for each child. They imagined that when the children eventually moved out of the family home, each would settle into one of these apartments.

On the surface, the plan seemed sensible. But it rested on an assumption the Joshis had not tested: would their children actually want these properties?

Over time, their daughter Nilima, moved to London for her undergraduate studies, while their son Nikhil relocated to California to build his startup. Nilima did not want to own an ageing property in India, preferring to buy a new home in London. Nikhil preferred not to hold any property, choosing to keep his assets liquid.

The Joshis’ example is a risk many families face in property-led inheritance planning. We often confuse an asset’s value with its usefulness. A ₹1 crore property and a ₹1 crore financial portfolio may have the same value in a household balance sheet, but they are not equally useful when lives change over the years.

Properties that are equal in value on the date of purchase may not be equal in the future. The Joshis had bought both properties at roughly the same value. Twenty years later, the two assets had appreciated very differently. While one benefited from a newly built Metro line, improving its value and appeal, the other lost value after a noisy cinema theatre opened down the same street. One generated a decent amount of rent, while the other required constant maintenance.

What the Joshis had intended as an equal inheritance now created a practical problem: the assets could no longer be distributed fairly or easily. A decision that was made to simplify inheritance had now created complexity because of its inflexibility.

Real estate vs liquid assets

Real estate is often treated as readily usable wealth, but it behaves very differently from money. When Nilima needed funds for her master’s programme, the Joshis could not sell just one part of an apartment. To access the money, they would have had to sell the entire property and incur an immediate, large tax liability. They decided against selling the apartment and instead used part of their mutual fund portfolio to pay the fees.

A financial portfolio is easier to adapt as family circumstances change, because it has this remarkable quality called fungibility. You can use it towards any expense, present or future, and it remains agnostic to its end use. It can be divided between beneficiaries in different proportions; partially liquidated when money is needed; rebalanced across equity, debt, or commodities as goals change; and used to support multiple priorities, including education, retirement, and inheritance planning.

So, while a ₹1 crore mutual fund portfolio can be split, redirected, or drawn down in stages, a ₹1 crore house does not offer the same flexibility. You cannot sell only the kitchen when you need ₹30 lakh for an immediate expense, nor can you practically assign 45% of a home to one child and 55% to another.

A property may have significant value on paper, yet that value is tied to a specific location, condition, market, and set of practical constraints. Selling a property also depends on finding the right buyer at the right time. This makes real estate especially difficult to use when planning an inheritance for the next generation.

Still, flexibility is not the only quality that matters when evaluating an asset. Some assets are valuable not just because they can be sold, divided, or redirected easily, but because they provide security, utility, income, or emotional wellbeing.

A primary residence provides security in a deeply tangible way. There is real comfort in knowing that a fully paid-for home insulates a family from rent increases. A rented home may generate meaningful income, and property values can appreciate significantly over time. In that sense, real estate can offer comfort, security, and emotional value in ways that an account statement never can.

Nevertheless, when a goal is decades away, and the future use of the asset is uncertain, liquid financial assets generally offer more choice. Ultimately, good financial planning begins with understanding what purpose each asset is meant to serve. Perhaps the best gift parents can leave their children is optionality: the freedom to make their own choices as their lives unfold.

Priya Sunder is the co-founder and director of PeakAlpha Investments.