A very interesting question that seems to haunt most of the 20+ and 30+ somethings (including yours truly). My answer to your question is both.
Real Estate is seriously long term where your minimum term may be around 10-20 years before you make some serious money of it. Only in a very specific cases, there is appreciation in short term, but thats a minority. If you are talking about serious money, then you need to bide your time.
One rejoinder to the above point is that when we talk of Real Estate, we should be talking of investment and not the appreciation that the flat (where one resides) undergoes. That's paper money and can't/shouldn't be liquidated. What good is a investment if one doesn't have a roof over the head?
MF is good in short, medium and long term. The advantage of MF is it's adaptability (it's not easy to sell one site and buy another as compared to selling one MF and buying another), Liquidity and ease of operation.
My choice, Go for both.
Properties In India