How do I calculate rental yield on a flat in India? Divide a year of rent by the price for the gross yield. Take off the empty months and the running costs first, then divide by the price for the net yield. That is the whole method, and this post does it with one invented flat so you can copy the steps with your own numbers.
Please read this first. Holdengard is not a broker or adviser. It is not RERA-registered and holds no real-estate licence at present. This post is general information, not investment, legal or tax advice, and it promises no return. Every number in the worked example below is invented and illustrative. It is not market data and not a real flat.
Try it with your own numbers
Open the free rental yield and ROI calculator
Type a price, a rent and your costs to see gross and net yield, cash-on-cash and a 10-year return, with bear, base and bull cases. Runs in your browser.
Open the free rental yield and ROI calculatorThe three formulas
- Gross yield = (monthly rent × 12) ÷ price × 100
- Net yield = (rent actually collected in a year − running costs for the year) ÷ price × 100
- Cash-on-cash = year-1 cash flow after loan payments ÷ the cash you put in × 100
Rent actually collected means the rent for a full year minus the time the flat has no tenant. Running costs are maintenance and service charges, property tax and insurance, all added together for the year.
The invented example (illustrative numbers only)
| Input | Illustrative value |
|---|---|
| Purchase price | ₹80,00,000 |
| Monthly rent | ₹25,000 |
| Time with no tenant | 10% of the year |
| Running costs a year | ₹50,000 |
| Cost to buy (duty, registration, fees) | 7% of price, ₹5,60,000 |
Step 1: gross yield
A year of rent is ₹25,000 × 12 = ₹3,00,000. Divide by the price: 3,00,000 ÷ 80,00,000 = 3.75%.
Gross yield is the number brochures like to quote. It is a starting point, not what you keep.
Step 2: net yield
- Rent lost to empty months: 10% of ₹3,00,000 = ₹30,000. Rent collected is ₹2,70,000.
- Take off running costs of ₹50,000. What is left is ₹2,20,000.
- Divide by the price: 2,20,000 ÷ 80,00,000 = 2.75%.
One more view is worth having. Buying costs are real money too, so the net yield on your total cost is 2,20,000 ÷ (80,00,000 + 5,60,000) = 2,20,000 ÷ 85,60,000 = 2.57%. The calculator shows both.
So in this invented case, a 3.75% gross yield became 2.75% net, and 2.57% once buying costs are counted.
Step 3: add a loan and see cash-on-cash
Suppose, again illustratively, you pay 50% down and borrow ₹40,00,000 at 9% a year over 20 years. The monthly payment (EMI) works out to about ₹35,989, or about ₹4,31,868 a year.
- Cash you put in: ₹40,00,000 down payment plus ₹5,60,000 buying costs = ₹45,60,000
- Year-1 cash flow: ₹2,20,000 − ₹4,31,868 = about −₹2,11,868, which is about −₹17,656 a month
- Cash-on-cash: −2,11,868 ÷ 45,60,000 = about −4.65%
These figures were calculated with the same EMI and cash-flow formulas the calculator uses, from the inputs above. Part of every EMI repays the loan, so a negative cash flow is not the same as a loss on the whole deal. It does mean you would be adding money from your own pocket every month. Many people only notice this after they sign.
Step 4: compare it with something safe
A net yield means little on its own. Put it next to what a safe alternative pays where you live, such as a government bond or a bank deposit, and next to the loan rate you would pay. Our post on gross yield, net yield and the bond test explains the comparison. If you are counting on the price rising, say so out loud and try the calculator at 0% growth too.
Run it with your own numbers
- Open the Rental yield and ROI calculator and pick the currency.
- Enter the price and the monthly rent you were quoted, from documents rather than a brochure's "expected" rent.
- Set the time with no tenant and the running costs a year with your own figures. The calculator's starting numbers are examples, not market data.
- Set the cost to buy. For India, the NRI Total Cost Calculator helps you avoid guessing.
- Tick the loan box only if you are really borrowing, and use a rate you were actually quoted.
- Compare bear, base and bull. If the bear case would hurt, size the purchase so you could live with it.
- For more side-by-side comparisons, use the Property Lab.
What the numbers leave out
- Income tax on rent and tax on a sale gain. The calculator does not include them, so ask a chartered accountant.
- Price falls, long gaps with no tenant and repairs bigger than your yearly estimate.
- For new homes, check the project first: the five RERA checks take under an hour. Where you are unsure about a rule, verify with a licensed local professional.
Frequently asked questions
How do I calculate rental yield on a flat in India?
Gross yield is a year of rent divided by the purchase price. Net yield first subtracts the months with no tenant and the running costs, then divides by the price. In our invented example, ₹25,000 a month on ₹80,00,000 is 3.75% gross and 2.75% net.
What is the difference between gross and net yield?
Gross yield ignores costs. Net yield takes off empty months, maintenance and service charges, property tax and insurance, so it is always lower. Net is the figure to compare between properties.
Should I include buying costs?
It is worth looking at both. Net yield on price is the common comparison, and net yield on your total cost shows what the money you actually spent earns. In the example, 2.75% became 2.57%.
What is a good rental yield?
There is no single good number. Compare the net yield with a safe alternative where you live and with your loan rate, then ask how much price growth you would be relying on.
Are the numbers in this post real?
No. The flat, the rent, the costs and the loan are invented for illustration. Replace each one with your own checked figures. Holdengard is not a broker or adviser, is not RERA-registered and holds no licence at present, and nothing here is a promise of return.
Does the calculator store my numbers?
No. It runs in your browser and sends nothing unless you press the optional "Send me my result" button on the page.
