Rental Property
ROI Analyzer

Gross rental yields in Indian cities typically range from 2.5% to 5%. Mumbai and Delhi tend to have lower yields (2.5%–3.5%) due to high property prices relative to rents. Hyderabad, Pune, and Bangalore offer better yields (3.5%–5%). Tier-2 cities like Ahmedabad, Jaipur, and Lucknow can offer 4%–6% gross yields. A gross yield above 4% is generally considered good in Indian metros. Net yield (after expenses) is usually 1–2% lower. Commercial properties typically yield 6%–9% but carry higher risk and require larger capital.

Cap rate (Capitalization Rate) is Net Operating Income (NOI) divided by the property purchase price, expressed as a percentage. It measures a property's return assuming all-cash purchase (no loan). In Indian residential real estate, cap rates of 3%–5% are typical in Tier-1 cities. For commercial properties (office spaces, retail), cap rates of 6%–9% are common. A higher cap rate means better returns but also potentially higher risk. Cap rate is useful for comparing properties irrespective of how they are financed.

Cash-on-cash return measures the annual cash flow generated as a percentage of the actual cash you invested (down payment + renovation + buying costs). Unlike cap rate, it accounts for the effect of leverage (home loan). For example, if you invested ₹30 lakhs in a property and get ₹1.5 lakhs in annual cash flow after all EMIs and expenses, your cash-on-cash return is 5%. A cash-on-cash return of 5%–8% is considered reasonable for Indian residential rental property with leverage. Below 3% suggests the deal may not be worth the risk versus fixed deposits or mutual funds.