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Summary
Rental yield in India is among the lowest globally, typically ranging from 2-4% gross in major cities. Despite this, property remains a popular investment due to expected capital appreciation. The calculator computes both gross and net rental yield after accounting for maintenance, vacancy, property tax, and income tax on rental income.
How it works
Gross rental yield
Gross yield = (Annual rent / Property value) x 100
Net rental yield
Net yield = ((Annual rent - Annual expenses) / (Property value + Purchase costs)) x 100
Annual expenses include:
- Maintenance charges: Rs 3-8 per sq ft/month in gated communities
- Property tax: 0.5-1% of property value (varies by municipal corporation)
- Vacancy allowance: Typically 1-2 months/year between tenants
- Repairs and painting: Budget 5-10% of annual rent
- Insurance: Minimal in India (not widely adopted)
Taxation of rental income
Rental income is taxed at slab rates under “Income from House Property”:
- Standard deduction: 30% of Net Annual Value (after deducting municipal taxes)
- Interest deduction: Section 24(b) allows deduction of home loan interest (up to Rs 2 lakh for self-occupied; no limit for let-out property)
- Net Annual Value = Actual rent received minus municipal taxes paid
Typical yields by city
| City | Gross yield | Avg rent (2 BHK) | Avg price (2 BHK) |
|---|---|---|---|
| Mumbai | 2.0-2.5% | Rs 35,000-50,000 | Rs 1.5-2.5 Cr |
| Bangalore | 3.0-4.0% | Rs 25,000-35,000 | Rs 80L-1.2 Cr |
| Delhi NCR | 2.0-3.0% | Rs 20,000-30,000 | Rs 80L-1.5 Cr |
| Pune | 3.0-3.5% | Rs 18,000-25,000 | Rs 60L-90L |
| Chennai | 3.0-3.5% | Rs 18,000-25,000 | Rs 60L-1 Cr |
Worked example
Property: Rs 1 crore in Bangalore, Monthly rent: Rs 28,000, Maintenance: Rs 4,000/month, Property tax: Rs 15,000/year, 1 month vacancy
- Gross annual rent: Rs 28,000 x 12 = Rs 3,36,000
- Gross yield: Rs 3,36,000 / Rs 1,00,00,000 = 3.36%
- Annual expenses: maintenance Rs 48,000 + property tax Rs 15,000 + vacancy Rs 28,000 + repairs Rs 20,000 = Rs 1,11,000
- Net rent: Rs 3,36,000 - Rs 1,11,000 = Rs 2,25,000
- Net yield: Rs 2,25,000 / Rs 1,00,00,000 = 2.25%
After-tax (30% bracket): Standard deduction of 30% on NAV, so taxable rental income is approximately Rs 2,25,000 x 0.7 = Rs 1,57,500 — tax of Rs 47,250. Post-tax yield: approximately 1.78%.
Key differences from other markets
- Very low yields by global standards: Indian rental yields (2-4%) are well below the UK (5-7%) and US (6-10%). Indian property investment relies heavily on capital appreciation rather than rental cash flow.
- 11-month lease convention: Most Indian residential leases are for 11 months (to avoid registration requirements), creating frequent renewal friction and potential vacancy gaps that reduce effective yield.
数据来源
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