What Counts as a Good Rental Yield in India? (And Why It's Lower Than You Expect)

Ask what a good rental yield is and you will hear numbers like 8% or 10%, borrowed from other countries or from commercial property. For Indian residential property in 2026, the benchmark is lower: a gross yield of 3% to 4% is about as good as most cities offer, and many sit below that. Understanding why changes how you read every rent-versus-buy decision.

What rental yield is, and the two versions of it

Rental yield is the annual rent a property earns as a percentage of its price.

Gross yield = (annual rent ÷ price) × 100. A ₹1 crore flat let at ₹30,000 a month earns ₹3,60,000 a year, a gross yield of 3.6%.

Net yield subtracts what it costs to own the flat: society maintenance, property tax, insurance, repairs, and the weeks it sits empty between tenants. Those typically take 0.5 to 1.0 percentage points off the gross figure, so that 3.6% is nearer 2.7% in the hand. Add the brokerage and repainting each new tenancy brings and more than a full point can separate the two. When a headline quotes a yield, always check which one it means; gross figures flatter the number. Our glossary of rent and buy terms defines these and the rest of the vocabulary you will meet.

A realistic benchmark for India in 2026

Here is roughly where the major cities sit, gross, drawn from our city-by-city rental-yield data for 2026:

Set against alternatives, the picture is plain. A fixed deposit pays around 6.5% to 7% in 2026. Debt mutual funds sit in a similar range. Equity index funds have historically returned 10% to 12% over long periods, with the usual caveat that past returns are not a promise. On rental income alone, residential property trails all of them. So a "good" yield in India is best read as relative: good means healthy for its city, not high in absolute terms.

A low yield is the tenant's side of the same coin: renting is cheap relative to the price of the flat. That is an argument for renting while you are earning, but it comes with a tail risk, because rent keeps climbing after your salary stops. We work through that in the retirement trap of lifelong renting.

Why Indian residential yields are so low

Yield is a ratio, and in India the denominator has run ahead of the numerator. Property prices in the metros rose faster than rents through the 2020s, so even as rents climbed, yields fell or held flat. Buyers have been paying for expected appreciation and for the intangible security of ownership, not for rental income. That is why a flat can be a poor income asset and still, over a long horizon, a defensible purchase.

What a low yield actually tells you about renting or buying

A low yield is not an argument for renting or an argument for buying by itself. It is information, and it cuts both ways.

  • For a buyer: a low yield means the price is high relative to rent, so appreciation has to do the heavy lifting for ownership to pay. It raises the bar, it does not close the door. Leverage from a home loan, the removal of rent from your budget, and a long holding period can all tilt the maths back towards buying.
  • For a renter: a low yield means you occupy the asset for a yearly cost well below its price. The lower the yield, the larger the sum you keep by renting rather than buying, and the more that invested difference can compound. Renting wins when you actually invest the gap.

The number that settles it is never the yield on its own. It is the yield together with your time horizon, the price growth you genuinely expect, and the return you would earn on the money renting frees up. That is the calculation the Rent vs Buy Calculator runs, and the Property Investment Calculator shows the same maths from a landlord's side. Our guide to the full rent-or-buy decision in India covers the factors that sit alongside the yield, and the 2026 property investment guide sets the market backdrop those yields sit against.

How to judge a yield on a specific flat

Work out the gross yield yourself: annual rent divided by price, times 100. Then take off holding costs for the net figure. Compare that net yield against what the same money would earn in a fixed deposit or an index fund, and remember to add your honest estimate of price appreciation before you conclude that buying loses. For a specific property, the rental yield calculator runs the gross and net pair and models the holding costs, so you are comparing like with like.

Rental yield questions, answered

Is 3% a good rental yield in India?

For a major metro, 3% is about average, and roughly the ceiling in the priciest pockets such as South Mumbai, so there it is "good" only in the sense of being normal. Mumbai's outer corridors, Thane and Navi Mumbai, do better, reaching 4% to 7%. It is below a fixed deposit, so on rental income alone it is not compelling; the case for owning at that yield rests on appreciation and a long holding period.

What is a good rental yield percentage?

In the Indian residential context, 4% or more gross is healthy, 3% to 4% is typical for the better metros, and below 3% signals a high price relative to rent. Tier-2 cities and cheaper markets can reach 5% to 6%. Always compare net yield, not gross, against other investments.

Why are rental yields so low in India?

Because prices have risen faster than rents. Buyers have paid for expected capital appreciation and the security of ownership rather than for rental income, which pushes the price up and the yield down. This is most extreme in Mumbai and in premium central areas of every city.

Should I buy a property with a low rental yield?

Possibly, if you expect meaningful price appreciation and will hold for many years, or if you value owning your home for its own sake. On income alone a low yield loses to safer alternatives, so run the full comparison, including appreciation and the return on the money you would otherwise invest, before deciding.