Rental yield and the rent-vs-buy decision
Loans & money · 6 min read · Reviewed February 2026
Gross rental yield is annual rent divided by property value. Net yield subtracts maintenance, property tax, insurance, repairs and expected vacancy. Residential yields in large Indian cities are typically low relative to home loan rates, which is why the rent-vs-buy question usually turns on how long you will stay and what you would otherwise do with the down payment.
Calculating yield honestly
Gross yield = annual rent ÷ purchase price. It is the number quoted in listings, and it flatters reality because it ignores every recurring cost.
Net yield subtracts society maintenance, property tax, insurance, an allowance for repairs, and vacancy — a flat empty for one month a year loses roughly 8% of its rent.
- Use the all-in acquisition cost, including stamp duty and registration, not just the headline price.
- Count brokerage on re-letting if you use an agent each time.
- Model at least a few weeks of vacancy per tenant change.
Rent vs buy: the comparison that works
Compare the true cost of owning for the period you expect to stay — loan interest, maintenance, property tax, transaction costs on both entry and exit — against rent plus the return you could earn on the money you did not put into a down payment.
Transaction costs are the reason short horizons favour renting: stamp duty, registration and brokerage are paid up front and are not recovered in a quick resale.
Where yields differ
Commercial and co-living formats typically show higher gross yields than plain residential, with different tenant risk, lease structures and vacancy behaviour. Compare like with like before treating a higher yield as a better deal.
Frequently asked questions
- What is a good rental yield in India?
- There is no single benchmark. Compare a specific property's net yield against the alternatives available to you, and against your loan rate if you are borrowing.
- Does yield include appreciation?
- No. Yield measures income only. Total return is yield plus any change in capital value, which is not guaranteed.
- Is buying always better than renting long-term?
- Not automatically. It depends on price-to-rent levels in that market, your holding period, financing cost and what the down payment would otherwise earn.