For many Indian investors, property investment is mostly about appreciation. But an equally important metric—and often the most ignored—is rental yield. Rental yield tells you how much income your property generates each year relative to its value, helping you judge whether a property is financially efficient.

This guide explains what rental yield is, how to calculate it, why it matters, and how Owne’s Rental Yield Calculator helps investors make better decisions.

What Is Rental Yield?

Rental yield is the annual rental income earned from a property, expressed as a percentage of the property's total value.

Formula:
Rental Yield (%) = (Annual Rent ÷ Property Value) × 100

It helps compare returns across properties, especially when evaluating real estate in metros like Bangalore.

Example: Calculating Rental Yield

Property Value = ₹1 crore
Monthly Rent = ₹35,000 (₹4.2 lakh annually)
Rental Yield = 4.2%

This means the property provides a 4.2% annual return before taxes and expenses—useful when comparing rental income properties in Bangalore.

Gross vs Net Rental Yield

Gross Rental Yield:
Annual rent divided by property value (no expenses included).

Net Rental Yield:
(Annual rent minus expenses) divided by property value.

Expenses include:
• Maintenance charges
• Property tax
• Repairs and renovations
• Vacancy losses

Example: If annual expenses = ₹1 lakh, net rent = ₹3.2 lakh → Net Yield = 3.2%.

Average Rental Yields in India (2025)

Residential: 2–4%
Commercial: 6–9%
Co-living/student housing: 5–7%
Bangalore apartments: 2.5–3.5%
Premium areas (Indiranagar, Koramangala): ~2% but higher appreciation potential

India’s rental yields are low compared to global real estate markets where yields average 6–8%.

Rental Yield vs Appreciation

Most Indian investors buy property for appreciation, but yield plays an equally important role.

Appreciation is long-term and uncertain.
Yield provides predictable cash flow, supports EMIs, and reduces investment risk.

Smart investors evaluate both together.

Why Rental Yield Matters

• Helps assess if rent covers EMI obligations
• Allows comparison between different localities or cities
• Acts as a benchmark vs FDs, REITs, mutual funds
• Reduces financial risk by offering consistent inflow

Case Study: Two Bangalore Flats

Flat A (Whitefield): ₹80 lakh, rent ₹28,000 → Yield = 4.2%
Flat B (Indiranagar): ₹1.2 crore, rent ₹30,000 → Yield = 3%

Flat B may appreciate more, but Flat A generates stronger annual returns.

How Owne’s Rental Yield Calculator Helps

Owne’s calculator provides accurate yield measurement:

• Input property value and expected rent
• View gross yield and net yield
• Compare yields across cities and property types
• Integrate yield with IRR using Owne’s IRR Calculator

Instead of relying on guesses or agent claims, investors get clear numbers before committing.

Common Mistakes Investors Make

• Ignoring vacancy periods
• Overestimating achievable rent
• Leaving out maintenance and repair costs
• Looking only at yield without IRR or appreciation

Example Using Owne’s Model

Investment: ₹20 lakh stake in a co-invested 2BHK
Annual inflow: ₹1.8 lakh → 9% yield
Plus capital appreciation share → IRR ~13–14%

This offers better stability and returns compared to traditional renting.

FAQs

1. What is rental yield?
Rental yield is the annual rent earned from a property as a percentage of its total value. It helps investors compare returns across different properties and cities.

2. How do I calculate rental yield?
Use the formula:
Rental Yield (%) = (Annual Rent ÷ Property Value) × 100.

3. What is a good rental yield in India?
For residential property, 2–4% is typical. For commercial property, 6–9% is considered strong.

4. What is the difference between gross and net rental yield?
Gross yield does not include expenses. Net yield subtracts costs like maintenance, taxes, repairs, and vacancy losses.

5. Should I focus on rental yield or appreciation?
Both matter. Yield gives immediate cash flow; appreciation builds long-term wealth.

6. Why are rental yields low in India?
High property prices relative to rent and regulatory caps reduce yield percentages.

7. Can NRIs calculate rental yield the same way?
Yes, but they must account for TDS deducted by tenants while receiving rent.

8. How does Owne improve rental returns?
Owne structures co-investment deals that offer higher monthly yields plus appreciation share, improving total IRR.

Conclusion

Rental yield is a simple but powerful metric for real estate investors. While appreciation builds long-term wealth, rental yield supports cash flow and improves overall return quality.

Owne helps investors with:
• A Rental Yield Calculator
• Transparent benchmarks
• A co-investment model that delivers stronger yields and better IRR

Before investing, calculate your property’s rental yield and ensure the numbers justify the purchase.