Executive Summary. This paper reviews the real estate markets in India and assesses the risk-adjusted performance and portfolio diversification benefits for the real estate markets (office, retail and residential) of New Delhi and Mumbai (two largest cities in India) over the 1998: Q2-2005:Q4 period. The real estate markets were found to under-perform the stock market in India over 1998- 2005, with most markets improving their performance in more recent years, although there was some loss of portfolio diversification benefits for office and residential real estate with stocks. Deregulation of the capital markets and international investment in India is also likely to have a significant impact on future FDI levels and the growth of real estate funds for real estate investment in India.