Forms include a swap that exchanges the total return of a property index (rental income plus price gains) for an interest rate, as well as futures and options on an index. The transaction is on the index value, not on the property itself.
Consider a hypothetical example in which a company that owns a property worth 10 billion yen enters a swap in which it pays the index total return and receives 3% a year. In a year when the index falls, it receives more, which offsets the loss on the property, but in a year when the index rises, it gives up the property's price gain. The investor on the other side gains if the index rises by more than the interest the investor pays (3% a year in the example), and loses if the index rises by less than that or falls (with 3% interest and an index of +2%, 2 − 3 = −1).
The property and the index do not always move together, so a mismatch known as basis risk remains.