Global Property Guide

Financial Information for the Residential Property Buyer


India's residential property yields still low

Last Updated: June 29, 2017

Last Updated: June 29, 2017
BANGALORE - Apartments PRICE/SQ.M. (US$) YIELD (p.a.) PRICE/SQ.FT. (US$)
TO BUY MONTHLY RENT TO BUY MONTHLY RENT
Electronic City 706 2.35 4.00% 66 0.22
JP Nagar 807 2.77 4.12% 75 0.26
Koramangala 1,553 4.35 3.36% 144 0.40
Old Madras Road 729 2.43 4.00% 68 0.23
Sarjapur Road 942 3.15 4.01% 88 0.29
Whitefield 894 2.77 3.72% 83 0.26
Yelahanka 808 2.43 3.61% 75 0.23
CALCUTTA - Apartments
Alipore 2,181 5.16 2.84% 203 0.48
Ballygunge 1,585 4.32 3.27% 147 0.40
Bhawanipur 1,617 4.33 3.21% 150 0.40
Gariahat 1,600 4.20 3.15% 149 0.39
Jadavpur 828 2.73 3.96% 77 0.25
Jodhpur Park 1,227 3.35 3.28% 114 0.31
Kasba 809 2.92 4.33% 75 0.27
Lake Gardens 941 3.15 4.02% 87 0.29
Rajarhat 721 2.15 3.58% 67 0.20
Salt Lake 874 2.72 3.73% 81 0.25
NEW DELHI - Apartments
Anand Niketan 4,526 7.24 1.92% 420 0.67
Defence Colony 4,283 7.28 2.04% 398 0.68
Greater Kailash 2,627 4.27 1.95% 244 0.40
Hauz Khas 3,279 5.38 1.97% 305 0.50
Janakpuri 1,473 3.03 2.47% 137 0.28
New Friends Colony 3,197 5.38 2.02% 297 0.50
Panchsheel Park 3,629 5.81 1.92% 337 0.54
Punjabi Bagh 2,163 3.97 2.20% 201 0.37
Saket 2,311 3.66 1.90% 215 0.34
Vasant Vihar 4,330 7.90 2.19% 402 0.73
SOUTH MUMBAI
Breach Candy 9,185 20.51 2.68% 853 1.91
Colaba 6,290 17.14 3.27% 584 1.59
Cuffe Parade 9,874 20.41 2.48% 917 1.90
Cumbala Hill 9,171 20.25 2.65% 852 1.88
Malabar Hilla 9,952 21.06 2.54% 925 1.96
Napeansea Road 10,932 21.14 2.32% 1,016 1.96
Nariman Point 16,258 n.a. n.a. 1,510 n.a.
Walkeshwar 9,841 19.35 2.36% 914 1.80
Worli 5,957 13.70 2.76% 553 1.27
All yields are gross - i.e., before taxes, repair costs, ground rents, estate agents fees, and any other costs. Net yields (what you´ll really earn) are typically around 1.5% to 2% lower.
Source: Makaan Definitions: Data FAQ See also: Update Schedule

Residential property prices have risen strongly in India in recent years. Rents have not kept pace, so it is hardly surprising that the gross rental yield - i.e., the percentage return on your purchase of property - is low in India´s major cities.

South Mumbai has very low rental yields, with property investors earning around 2.40% gross. Apartments remain expensive. In US$ terms they are less expensive this year than last, reaching about US$9,800 per square metre (sq.m.) for 120 sq.m. apartments.

In New Delhi, prices per sq. m. are of course much lower, despite the continuous price rises in that city. In 2016, the price per sq. m. of a 120-sq.m. apartment in New Delhi was around US$3,350. Gross rental yields in Delhi remain poor, at between 2.88% to 3.20%.

In Bangalore, prices are around US$1,000 to US$1,200 per sq. m. Rental yields are higher in Bangalore, ranging from 3.33% to 4.04%. Again, this is a long way below the nice yields of 7.16% to 9.92% which could be obtained way back in the year 2007.

Conclusion: Indian gross rental yields are very low. This suggests that Indian residential property is somewhat overvalued. While low rental yields do not always indicate over-valuation, especially in periods when interest rates are low, they are only justified if rapid economic growth is expected, and also, if there are sufficient restrictions on new building to prevent the market being flooded with new properties as prices rise. The buyer must ask himself whether these two conditions are met in India.

Round trip transaction costs are moderate to high in India. See our Property transaction costs analysis for India and Property transaction costs in India, compared to the rest of Asia

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