Why Indian rentals need a full-hold model
Judging an Indian rental on month-one cash flow will almost always tell you to walk away. Gross rental yields in the metros run about 2–4% — roughly 2–3% in Mumbai, 2.5–3.5% in Delhi/NCR, and around 3–3.6% citywide in Bengaluru (higher, 5–6%, in prime IT corridors like Whitefield and Sarjapur) — while home-loan rates sit meaningfully above that. The EMI exceeds the rent, so financed properties run negative cash flow from day one. The national gross-yield average of roughly 5% is lifted mainly by tier-2 cities.
That doesn't make the asset bad — it moves where the return lives. Indian property returns come from capital appreciation, disciplined loan paydown that quietly converts EMI into equity, and tax treatment. This calculator models all of it: rent growing each year, expenses inflating separately, the loan amortising, the property appreciating, and finally the sale net of costs. The IRR ties those cash flows into a single annualised number, which is the only fair way to compare a low-yield, high-appreciation property against, say, an SIP.
On tax. These figures are pre-tax by design. In practice you get a flat 30% standard deduction on net annual value under Section 24(a), and home-loan interest is deductible under Section 24(b) — fully for a let-out property, though the resulting house-property loss you can set off against other income is capped at ₹2 lakh a year. On exit, long-term capital gains apply after 24 months. See the capital gains calculator for the sale, the rental yield calculator for a quick screen, and property vs SIP to compare against equities.
This calculator's IRR runs on four moving parts the RBI and the Income Tax Department both regulate: how much of the price a bank will actually finance, how the EMI resets mid-hold, which tax regime taxes the rent, and what capital-gains rate applies the year you sell. RBI's Credit Facilities Directions, 2025 (para 113) exclude stamp duty from the loan-to-value calculation, floating rates must track an external benchmark such as repo, and property sold after 23 July 2024 is taxed at 12.5% long-term capital gains without indexation.
What the calculator's loan amount doesn't cover
RBI's Credit Facilities Directions, 2025 (paras 111 and 113) set loan-to-value ceilings that this calculator's down-payment split implicitly assumes: up to ₹30 lakh — up to 90%; above ₹30 lakh and up to ₹75 lakh — up to 80%; above ₹75 lakh — up to 75%. Those ceilings apply to the property's cost, not to what you actually pay at registration, because the same Directions tell banks to "not include stamp duty, registration and other documentation charges in the cost of the housing property it finances", with one exception: where the house costs ₹10 lakh or less, a bank may fold stamp duty and registration into the financed cost.
For every property above that ₹10 lakh line — which is effectively every deal this calculator is built for — stamp duty and registration sit entirely outside the loan. They belong in this calculator's Closing Costs field alongside the down payment, not folded into the financed amount, and the state government sets the actual percentage (it varies by state and, in several states, by the buyer's gender — confirm the current rate with your state's registration department before entering it).
Why the EMI in year five won't match year one
Since 1 October 2019, RBI has required that "all new floating rate personal or retail loans...to an external benchmark" — commonly the repo rate — with the lender setting its own spread but changing it only when the benchmark itself moves or the borrower's creditworthiness genuinely changes. If you're modelling a floating-rate loan in this calculator, the annual interest rate field is not a constant for the whole hold: it resets on whatever schedule your lender uses (typically quarterly) every time the Monetary Policy Committee changes the repo rate. RBI held the repo rate unchanged at 5.25% through every 2026 MPC meeting this registry could directly confirm (through June 2026) — that is not a permanent number, and the reader should check the current rate before treating any single-year EMI figure as fixed for the full hold period.
One consequence of the same rate regime is favourable to a long-hold investor: RBI's Pre-payment Charges on Loans Directions, 2025 bar lenders from charging foreclosure or pre-payment penalties on floating-rate loans to individuals for non-business purposes, for loans sanctioned or renewed on or after 1 January 2026. If the pro-forma shows strong cash flow in a later year and you want to prepay principal to improve the equity-build line this calculator tracks, a qualifying floating-rate loan carries no penalty for doing so — check your own sanction letter's date, since the rule only binds loans sanctioned or renewed from that date forward.
The tax regime changes what the pre-tax cash flow becomes
This calculator's cash flow is deliberately pre-tax. Which regime you file under changes how much of it you keep, and the two regimes now diverge more than they did before FY2023-24. Under the new (default) regime, the Income Tax Department's own FAQ states that "Interest on borrowed capital for Self-occupied property is not allowed as a deduction from Income from House Property" under Section 115BAC, and that Chapter VI-A deductions — the group Section 80C sits in — "cannot be claimed, except deduction u/s 80CCD(2)/80CCH/80JJAA" under the new regime.
This calculator models a rented (let-out), not self-occupied, property, and that FAQ page addresses the self-occupied case specifically — it does not state whether the same new-regime restriction extends to interest on a let-out property. Do not assume either way from this registry entry: confirm the let-out treatment for the regime you'll actually file under before using this calculator's pre-tax cash-flow line as a proxy for what reaches your bank account. Either way, Section 80C's ₹1,50,000 combined limit is an old-regime-only benefit and cannot be assumed available if you file under the new regime.
What the sale year owes that the pro-forma doesn't deduct
The pro-forma's net sale proceeds and the IRR that follows from them are computed before capital-gains tax. A government FAQ issued the day after the 2024 reform took effect confirms the property must be held 24 months to qualify as a long-term capital asset — unchanged by the 2024 simplification — and that for transfers made on or after 23 July 2024, the long-term capital gains rate on immovable property is 12.5% without indexation, down from 20% with indexation.
Reinvestment exemptions under Sections 54, 54B, 54D, 54EC, 54F and 54G were left unchanged by the 2024 reform, with Section 54EC bonds capped at ₹50 lakh of reinvestment — but this same FAQ does not state a rupee cap for a Section 54/54F rollover into another residential property, so this article does not supply one; check the current Section 54/54F cap directly with the Income Tax Department before relying on a figure from elsewhere.
There is no published yield figure to sanity-check this against
No official body — not RBI, not the National Housing Bank's RESIDEX index, not CREDAI, not the Ministry of Statistics — publishes a residential rental-yield or cap-rate series by Indian city. That means there is no authoritative number this calculator's output can be checked against; the year-one cap rate and cash-on-cash figures it produces are only as good as the rent and price you enter. Treat any city-level yield percentage you see elsewhere as a private estimate, not an official statistic, and build the pro-forma from your own building's actual asking rent and comparable sale prices instead.
Methodology
Loan-to-value and stamp-duty-exclusion figures are from RBI's Credit Facilities Directions, 2025 (paras 111 and 113). Repo-linked rate mechanics are from RBI's 2019 external-benchmark mandate and its 2026 Monetary Policy Committee resolutions. Prepayment-penalty rules are from RBI's 2025 Directions. Tax-regime treatment is from the Income Tax Department's own new-vs-old regime FAQ. Capital-gains rate and holding period are from a Press Information Bureau release of CBDT's FAQs on the 2024 reform, issued 24 July 2024. Every figure above is dated to its source; re-check the current repo rate and any capital-gains cap not stated here before filing.
Sources
- Reserve Bank of India — (Commercial Banks – Credit Facilities) Directions, 2025 (RBI/DOR/2025-26/154), Chapter VIII paras 90, 111 and 113 — accessed 2026-10-17
- Reserve Bank of India — External benchmark mandate for floating-rate retail loans — accessed 2026-09-21
- Reserve Bank of India — MPC Resolution (2026 meetings) — accessed 2026-09-21
- Reserve Bank of India — Pre-payment Charges on Loans Directions, 2025 — accessed 2026-09-21
- Income Tax Department — New vs Old Tax Regime FAQs — accessed 2026-09-21
- Press Information Bureau — CBDT FAQs on 2024 capital gains reform — accessed 2026-09-21
Gross rental yield by Indian city (2025–2026)
| City | Gross rental yield |
|---|---|
| Mumbai | 2.0–3.0% |
| Delhi / NCR | 2.5–3.5% |
| Bengaluru | 3.0–3.6% (5–6% prime IT corridors) |
| Pune | 3.0–3.4% |
| Hyderabad | 3.0–3.5% |
National gross-yield average ~5%, lifted by tier-2 cities (Global Property Guide 2025–26). With loan rates above yield, financed rentals typically run negative cash flow — the return comes from appreciation and paydown.
Frequently asked questions
Do Indian rental properties usually cash-flow positive?
Rarely, when financed. Gross rental yields in Indian metros run about 2–4% while home-loan rates are considerably higher, so the EMI typically exceeds the rent and early cash flow is negative. The investment case usually rests on capital appreciation, loan paydown, and tax benefits — the 30% standard deduction on net annual value under Section 24(a) and the deduction for home-loan interest under Section 24(b). This calculator shows the full picture including the eventual sale, which is where the return normally materialises.
What is an IRR and why does it matter more than cash flow?
Internal rate of return (IRR) is the annualized return across the entire life of the investment — every year of cash flow plus the proceeds when you sell — accounting for the fact that money received sooner is worth more than money received later. Cash flow alone tells you what the property pays you each month; IRR tells you what the whole investment earned per year. A property with weak cash flow but strong appreciation can have a far better IRR than one with the opposite profile.
What does the pro-forma table show?
It projects the investment year by year: gross rent growing at your rent-growth rate, operating expenses rising with inflation, the resulting cash flow, cumulative cash flow, the property's appreciating value, and your equity (value minus remaining loan balance). This is where the compounding shows up — a deal that is break-even in year one often cash-flows meaningfully by year five if rents outpace expenses.
How accurate are these projections?
They're only as good as the assumptions. Appreciation and rent growth compound, so small changes produce large differences over a 10- to 30-year hold — a one-point change in appreciation can swing total profit substantially. Treat the output as a model, not a forecast: run a conservative case alongside your base case, and be especially careful with the appreciation input, which is both the largest and least predictable component of total return.
Why does the calculator exclude income tax?
This is a pre-tax projection. Tax treatment varies enormously by investor — your marginal rate, depreciation, how losses can be offset, and the tax on sale all depend on personal circumstances and jurisdiction. Modeling it generically would create false precision, so we show pre-tax figures and cover tax separately in dedicated depreciation and capital-gains tools.