What is the Rental Yield?
Rental yield is annual rent as a percentage of property value — the income return, separate from capital appreciation. Gross yield ignores costs; net yield subtracts maintenance, property tax and vacancy, and is the number that actually matters.
Indian residential yields are famously low, typically 2–4% gross in major cities. Commercial property runs 6–9%. This is why residential property in India is largely an appreciation bet, not an income asset.
Formula & worked example
Two versions, before and after costs:
Net yield = ((Rent × (12 − vacancy) − costs) / Property value) × 100
Worked example: an ₹80,00,000 flat renting at ₹25,000/month. Gross rent is ₹3,00,000 → 3.75% gross yield. After one vacant month (₹25,000), ₹40,000 maintenance and ₹12,000 property tax, net income is ₹2,23,000 → 2.79% net. That is below a savings account after tax.
How to use this rental yield calculator
- Enter the current market value, not the price you paid years ago.
- Use the actual rent received, excluding maintenance the tenant pays directly.
- Include realistic maintenance — society charges, repairs, painting, broker fees on re-letting.
- Assume at least 1 month of vacancy a year unless you have a long-term tenant.
Smart tips
- Compare net yield against a fixed deposit. If a property yields 2.8% net, the rent is not the reason to own it — appreciation must justify it.
- Rental income is taxable at your slab, though a 30% standard deduction on net annual value applies.
- Home loan interest on a let-out property is fully deductible against rental income, which changes the after-tax picture substantially.
- Commercial and REIT yields are typically double residential. Consider REITs if income is the actual goal.
Frequently asked questions
What is a good rental yield in India?
Residential runs 2–4% gross in most cities, which is low globally. Commercial property and REITs deliver 6–9%. Anything above 5% residential is unusually good.
Is rental income taxable?
Yes, under "Income from House Property". You may deduct municipal taxes, a 30% standard deduction on net annual value, and the full home loan interest for a let-out property.
Should I include the home loan EMI in the yield?
No — yield measures the property's return, not your financing. Compare yield with your loan rate separately: if the loan costs 9% and yields 3%, rent covers only a third of the interest.
Why are Indian rental yields so low?
Property prices have risen much faster than rents for two decades. Buyers price in expected appreciation, which pushes yields down.
Want the theory behind the numbers? Read our property guides on the Money Blog.