Rental Yield Calculator

Five percent gross, four and a third net

A property worth ₹60,00,000 generating ₹3,00,000 of annual rent has a gross yield of 5%. After ₹40,000 of annual expenses, the net yield is 4.33%.

Gross yield = annual rent ÷ property value × 100 Net yield = (annual rent − annual expenses) ÷ property value × 100

The gap between the two is where most rental-property analysis goes wrong, because gross yield is the figure quoted by sellers and net yield is the figure you actually receive.

What Indian residential yields look like

Residential rental yields in Indian metros are low by international standards, typically 2% to 4% gross in prime areas and somewhat higher in peripheral locations and smaller cities. Commercial property yields considerably more — often 6% to 9% — with correspondingly different risk and liquidity.

The 5% gross in this example is therefore towards the upper end for residential.

The comparison that matters: a fixed deposit currently pays around 7% with no management effort, no vacancy risk and full liquidity. A residential property yielding 4.33% net is, on income alone, a worse investment than a deposit.

Which is why Indian residential property is fundamentally a capital appreciation play rather than an income play. The rental yield covers some of the holding cost; the return, if it comes, comes from the price. Any analysis that ignores this is incomplete.

The expenses that belong in the net figure

Many owners compute a net yield that is really a gross yield with one or two items removed. A complete list:

Property tax, annually.

Society maintenance, which in newer complexes can be substantial and is frequently the largest single expense.

Repairs and maintenance — budget 0.5–1% of property value annually as a long-run average, even in years when nothing happens.

Vacancy — the single most underestimated cost. One month vacant a year is 8.3% off the rent, which on this property is ₹25,000 and more than halves the margin between gross and net.

Brokerage on each new tenant, typically one month's rent, recurring with tenant turnover.

Insurance, and income tax on the rental income at your slab rate after the standard 30% deduction under Section 24(a).

Including all of these, a headline 5% gross frequently becomes 2.5–3% net.

Reading the result

Net yield is the right figure for comparing against other income-producing assets. For a complete picture of a leveraged purchase, compare the net rental income against the EMI — in most Indian metros the rent covers only 40–60% of the EMI on a typical loan, meaning the owner funds the difference monthly in exchange for equity and potential appreciation.

The other measure worth computing is the price-to-rent ratio — property value divided by annual rent. Here that is 60,00,000 ÷ 3,00,000 = 20. As a rough guide, ratios above 20 favour renting on pure cash-flow terms, and Indian metros frequently run between 25 and 40.

Common mistakes

Quoting gross yield as the return. Expenses typically remove a third to half of it.

Omitting vacancy. One empty month is 8.3% of annual rent.

Ignoring tax on rental income. It is taxed at slab rates after the 30% standard deduction.

Forgetting the opportunity cost of the down payment. That capital could be earning elsewhere.

Judging on yield alone. Indian residential property is an appreciation bet with a yield attached, not the reverse.