Rental yield and what a good return looks like in Indian metros

What rental yield means

Rental yield is the annual rent a property earns expressed as a percentage of its price. Gross yield is annual rent divided by price. So a home worth Rs 1 crore that rents for Rs 3 lakh a year has a gross yield of 3 percent. It is the cleanest single number for comparing how hard two properties work as income assets.

Indicative ranges in Indian metros

Residential gross yields in major Indian metros have historically sat in a modest band, often around 2 to 4 percent, which is low by global standards because capital values are high relative to rents. Commercial and some high-demand rental pockets can run higher. Treat these as indicative ranges, not a promise: yield depends on the exact locality, the property, and the rent you can actually command.

Net yield is the number that matters

Gross yield flatters, because a landlord never keeps all the rent. Net yield subtracts the costs of holding and letting the property before dividing by price.

• Maintenance and society charges, and repairs between tenants.
• Property tax and, where applicable, insurance.
• Vacancy: the weeks each year the home sits empty between tenants.
• Any management or brokerage cost of finding and keeping tenants.

After these, net yield is commonly a percentage point or more below gross. A 3.5 percent gross yield can become a 2.5 percent net yield once vacancy and upkeep are honest.

Yield is only half the return

A property's total return is rental yield plus capital appreciation, minus costs. Indian residential has historically leaned on appreciation more than income, which is why low yields do not automatically mean a poor investment. It does mean you should be clear-eyed: if you are buying mainly for rent, a thin net yield needs strong appreciation or a lower purchase price to make the case work.