Gross yield is annual rent divided by price. Net yield subtracts yearly costs such as maintenance, property tax and vacancy before dividing.
Example
A Gurugram flat
A 3 BHK in Gurugram costs ₹1.5 crore and rents for ₹35,000 a month, ₹4,20,000 a year. Gross yield is 4.2 lakh ÷ 150 lakh = 2.8%. Subtract ₹60,000 of yearly maintenance, ₹10,000 property tax and one month of vacancy (₹35,000) and the net rent is ₹3,15,000 — a net yield of 2.1%.
Figures are illustrative, not market rates.
Questions about Rental yield
What is the difference between gross and net rental yield?
Gross yield uses the full annual rent divided by the price. Net yield first subtracts annual costs such as maintenance, property tax, insurance, repairs and expected vacancy. Net yield is the better figure for comparing a flat with other investments.
Should the purchase price include stamp duty?
For a true picture, yes: use the total cost, including stamp duty, registration and any brokerage. Using only the agreement price makes yield look higher than what the investor actually earns on the money spent.
Does rental yield include price growth?
No. Rental yield measures income only. Total return adds the change in property value over time. In many Indian cities, investors accept modest rental yields because they expect price growth, which is not guaranteed.
See also
Reviewed