Rental Yield Calculator 2026 — Is Your Property a Good Investment?

A good rental yield in India depends on the city and property type. For residential properties, a gross yield above 3.5% is generally considered good and a net yield above 3% is considered excellent. Metro cities like Mumbai and Delhi NCR typically yield 2–3% gross due to high property prices relative to rents. Tier-2 cities like Hyderabad, Pune, Ahmedabad, and Bengaluru peripheral areas offer 3–5% gross yields. Tier-3 cities and smaller towns can sometimes deliver 4–6%, but liquidity is lower and appreciation may lag. NHB Residex data shows that residential property prices have outpaced rent growth in top metros over the past decade, compressing yields. If your goal is income (cash flow), look for cities where net yield exceeds the home loan interest rate (currently 8.5–9.5%). If your goal is capital appreciation, a lower yield may be acceptable.

Rental income in India is taxed under the head ‘Income from House Property’ in your ITR. The taxable amount is the Net Annual Value (NAV), calculated as: Gross Rent Received minus Municipal Taxes paid. From the NAV, two deductions are allowed under Section 24: (1) Standard deduction of 30% of NAV — this flat deduction covers repairs, maintenance, and depreciation regardless of actual expenditure. (2) Home loan interest deduction — for a let-out property, there is no upper limit on interest deduction (unlike the ₹2L cap for self-occupied property). The remaining amount is added to your total income and taxed at your applicable slab rate (5%, 20%, or 30%). Under the new tax regime (FY 2024-25 onwards), the standard deduction and home loan interest deduction for house property are not available. Choose the regime that minimises your tax after calculating both. TDS of 5% applies if annual rent exceeds ₹2.4L (tenant must deduct under Section 194-IB).

Gross rental yield is calculated as: (Annual Rent ÷ Property Value) × 100, without deducting any expenses. It represents the maximum income the property could generate as a percentage of its value. Net rental yield deducts all operating expenses — property tax, maintenance and society charges, building insurance, and vacancy losses — from the annual rent before dividing by property value. Net yield = (Net Operating Income ÷ Property Value) × 100. Net yield is the more accurate and conservative measure that reflects your actual income after running the property. The gap between gross and net yield varies: for a ₹75L property with ₹20K/month rent, gross yield might be 3.2% but net yield may fall to 2.5% after deducting ₹62,500 in annual costs. When comparing two properties, always compare net yields — a property with a slightly lower gross yield but fewer maintenance costs may actually be the better investment.

Capitalization rate (cap rate) is the ratio of Net Operating Income (NOI) to property value: Cap Rate = (NOI ÷ Property Value) × 100. NOI is calculated as: Effective Annual Rent (after vacancy) minus Operating Expenses (property tax + maintenance + insurance). Crucially, cap rate does NOT deduct mortgage/EMI payments — it measures the property’s income-generating ability independent of how it is financed. This makes it useful for comparing properties regardless of whether you are buying with cash or a loan. In India, residential property cap rates in metros are typically 2–3.5%. Cap rates above 4–5% for residential properties in India are uncommon and often indicate either very affordable markets or underpriced properties. Commercial property cap rates (offices, retail) are typically 5–9%. A higher cap rate means higher income relative to value, but may also reflect higher risk, lower quality location, or less price appreciation potential.

Both asset classes have merits, and the right answer depends on your investment goals, risk tolerance, and time horizon. Historical data comparison: Sensex/Nifty has delivered 12–15% CAGR over 20-year periods. Indian real estate in top metros has delivered 8–12% total returns (yield + appreciation). Equity advantages: higher liquidity (sell in seconds), no management hassles, lower transaction costs (no stamp duty, brokerage is 0.01%–0.1%), easy diversification, and SIPs allow starting with ₹500/month. Real estate advantages: tangible asset, leverage (home loans at 8.5% allow buying ₹75L property with ₹15L down payment), rental income stream, and some hedge against hyperinflation. Key consideration: Indian residential real estate typically requires ₹30L–₹1Cr+ minimum investment, is illiquid (takes months to sell), and has high transaction costs (7–10% stamp duty and registration). Many financial planners suggest a 60–40 or 70–30 allocation towards equity over real estate for wealth creation, with real estate exposure best taken through REITs for smaller investors.

Rental yields vary significantly by city and micro-market. Mumbai: 2–2.5% gross yield (high property prices depress yields despite strong rents). Delhi NCR (Gurgaon/Noida): 2.5–3.5% — Gurgaon’s newer sectors perform better due to corporate tenant demand. Bengaluru: 3–4% — among the best in metros, driven by IT sector demand and relatively moderate property prices. Hyderabad: 3–4.5% — strong demand in Gachibowli, Hitech City, and Financial District. Chennai: 3–3.5%. Pune: 3–4% — Hinjewadi and Kharadi corridors offer better yields. Ahmedabad: 3.5–4.5%. Tier-2 cities like Jaipur, Lucknow, and Indore can offer 4–5% but with lower liquidity and appreciation. Furnished apartments near IT parks and metro stations consistently command 20–40% rent premiums over unfurnished units.

Gross yield is the simple ratio of annual rent to property value — it ignores all costs. Net yield deducts operating expenses like property tax (typically 0.5–1% of property value), maintenance and society charges (₹3K–10K/month in gated communities), building insurance, and vacancy losses (typically 1–2 months per year). The gap between gross and net yield in India is usually 0.5–1.5 percentage points. Net yield is the metric that actually matters because it reflects the real cash return reaching your pocket. A property with 4% gross yield but ₹1.2L/year in society charges and property tax may deliver only 2.5% net yield. Always calculate net yield before comparing investment alternatives or deciding whether to buy.

Under the old tax regime, rental income is taxed under ‘Income from House Property’ with two deductions: a flat 30% standard deduction on Net Annual Value (NAV = Rent received − Municipal taxes paid) and home loan interest deduction (unlimited for let-out property). Under the new tax regime (default from FY 2024-25), the 30% standard deduction is still available, but home loan interest deduction on let-out property is limited to the rent received. If your rental income is ₹6L/year and home loan interest is ₹4L, the old regime may be better. Additionally, if annual rent exceeds ₹2.4L, the tenant must deduct 5% TDS (Section 194-IB) and deposit it with the government. This TDS is adjustable against your final tax liability when you file your ITR.

On a pure income comparison, FDs currently offer 6.5–7.5% annual returns (for 1–3 year tenures at major banks), while net rental yields on residential property average 2–3.5% in most metros. This means FDs generate 2–3x more annual income per rupee invested than rental property. However, rental property offers capital appreciation (typically 5–8% p.a. in good locations) which FDs do not. Over 10 years, a property’s total return (rental yield + appreciation) may reach 8–12% CAGR, comparable to or better than FDs. The key question is liquidity and hassle: FDs require zero management, have no vacancy risk, and can be liquidated instantly, while property involves tenant management, maintenance costs, and months to sell. For pure income seekers, FDs or debt funds are superior; for long-term wealth building with leverage, property has an edge.

Commercial properties in India consistently deliver higher rental yields than residential — typically 5–9% gross yield for office spaces and retail shops compared to 2–4% for residential. A ₹1 Cr commercial unit in a metro business district can generate ₹40K–60K/month rent, whereas a ₹1 Cr residential flat might fetch only ₹15K–25K/month. However, commercial property comes with higher risks: (1) longer vacancy periods (3–6 months vs 1–2 months for residential), (2) tenant concentration risk (a single company leaving can eliminate all income), (3) higher maintenance and fit-out costs, and (4) larger minimum investment (₹50L–₹2 Cr+). For smaller investors wanting commercial exposure, REITs (Embassy REIT, Mindspace REIT, Brookfield REIT) offer fractional commercial property investment starting from ₹300–400 per unit with 6–7% distribution yields and exchange liquidity.

Rental yield alone does not capture the full investment return from property. Total return = rental yield + capital appreciation. For example, a property with 3% net yield and 6% annual appreciation delivers 9% total return. This is why investors accept low rental yields in high-appreciation markets like Gurgaon, Bengaluru ORR, or Hyderabad Hitech City — the 5–8% annual price appreciation more than compensates for the 2–3% yield. However, appreciation is not guaranteed and varies by cycle: Indian real estate saw near-zero appreciation in many cities between 2014–2020, followed by a strong 8–12% annual recovery from 2021–2025. The 10-year projection in this calculator models total return by combining your rental income with an assumed appreciation rate, giving a realistic picture of long-term wealth creation from the property.