Rental Yields in Top Indian Cities: Residential (2-3%) vs Commercial (7-9%)
Before investing in real estate for passive rental income, you must calculate the true net rental yield rather than relying on builder brochures.
Gross vs Net Rental Yield Formula
Gross Rental Yield = (Annual Rental Income / Total Cost of Property) × 100
Net Rental Yield subtracts property taxes, society maintenance, tenant vacancy periods, and brokerage commissions from the annual rental income.
While residential real estate delivers modest 2.5% to 3.0% net yields, commercial office spaces and Real Estate Investment Trusts (REITs) provide 7% to 9% yields with built-in inflation escalation clauses.
Key Practical Takeaways:
Average Residential Rental Yields Across Top Indian Metros (2025)
| City | Average Gross Rental Yield | Property Appreciation (10Y CAGR) | Net Rental Yield |
|---|---|---|---|
| Bengaluru (IT Corridors) | 3.8% – 4.4% | 6.5% – 8.0% | 3.0% – 3.5% |
| Hyderabad (Hitec City) | 3.4% – 4.0% | 7.0% – 9.0% | 2.7% – 3.2% |
| Mumbai MMR | 2.2% – 2.8% | 4.5% – 6.0% | 1.6% – 2.2% |
| Delhi-NCR (Gurugram) | 3.0% – 3.6% | 6.0% – 7.5% | 2.4% – 2.9% |
Common Questions on This Topic
How is rental income taxed in India?
Rental income is taxed under 'Income from House Property'. You receive a standard 30% statutory deduction on net annual value for repairs and maintenance.
Interactive Calculators for This Guide
Rental Yield Calculator
Calculate gross and net rental yield percentages on residential and commercial real estate properties.
Rent vs Buy Calculator
Compare the long-term financial wealth built from buying a house vs renting and investing the difference in mutual funds.