Why is Indian residential yield so low?

Because prices are set largely by expected appreciation rather than by rent. A two to three percent gross yield is normal, and net is lower again, which is why the investment case rests on the capital value.

Investmentreal estate

Rental Yield Calculator

Gross and net rental yield side by side. Gross yield is what gets advertised and net yield is what you receive, and on Indian residential property the two are often a factor apart.

Also called: rental return calculator, gross yield.

Net rental yield

2.7%

2.7% net against a gross 3.75%. The gap is the 60,000 of costs and the 8% vacancy allowance, and it is the difference between the number in an advertisement and the number in your account.

Gross yield

3.75%

Annual rent, fully let

₹3,00,000

After vacancy

₹2,76,000

Net income after costs

₹2,16,000

Net per month

₹18,000

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

Gross yield is annual rent over property value and ignores everything that happens between the tenant paying and you banking it. Net yield subtracts a vacancy allowance, because no property is let every day of every year, and the running costs of tax, maintenance and insurance. Net is the figure to compare against a deposit rate or a bond, since those pay without maintenance.

net yield = (annual rent less vacancy, less costs) / property value

R: Monthly rent (currency)
v: Vacancy allowance (decimal)
C: Annual costs (currency)
V: Property value (currency)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

typical Indian residential

Property value: ₹80,00,000
Monthly rent: ₹25,000
Annual costs: tax, maintenance, insurance: ₹60,000
Vacancy allowance: 8%

Net rental yield2.7%

Worked by hand at each step

Open this example

no costs and no vacancy makes the two equal

Property value: ₹80,00,000
Monthly rent: ₹25,000
Annual costs: tax, maintenance, insurance: ₹0
Vacancy allowance: 0%

Net rental yield3.75%

boundary

Open this example

Method and limits

What it assumes

The property value entered is current market value rather than purchase price.

What it deliberately does not model

Mortgage interest is a financing cost rather than a property cost and is excluded, so this is an unlevered yield.
Capital appreciation is not included and is usually the larger part of a property return.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Why is Indian residential yield so low?: Because prices are set largely by expected appreciation rather than by rent. A two to three percent gross yield is normal, and net is lower again, which is why the investment case rests on the capital value.