Every conversation about Indian rental property arrives at the same complaint: the yields are terrible. And arithmetically, that is true — a Mumbai flat producing 2.0–2.6% gross looks indefensible next to a Cleveland duplex at 7.8%. But the complaint misunderstands what Indian property is. Yield is rent divided by price, and Indian prices have outrun rents for years. The return did not disappear; it moved from income to appreciation.
Premium-segment gross rental yield by city
Premium/luxury segment gross yields (Sobha, 2026). Mid-market and tier-2 property can yield differently; other published series using asking prices report higher citywide figures.
| City | Gross yield | Note |
|---|---|---|
| Bengaluru | 3.0–3.6% | The strongest premium-segment yield among India's major metros, underpinned by IT-corridor employment demand. |
| Hyderabad | 3.0–3.5% | Comparable to Bengaluru on premium yield, with substantial IT-corridor rental demand. |
| Gurgaon | 3.0–3.5% | Corporate-occupier demand supports premium rents across the NCR's strongest office market. |
| Pune | 3.0–3.4% | IT and manufacturing employment underpins premium rental demand. |
| Greater Noida | 3.0–3.4% | Lower entry prices than Gurgaon at a broadly similar premium-segment yield. |
| Chennai | 2.8–3.2% | Steady premium rental demand; yields sit modestly below the western and southern IT hubs. |
| Mumbai | 2.0–2.6% | India's lowest premium-segment yield — prices are extreme relative to rents, so the return has to come from appreciation. |
Source: Sobha (2026), premium/luxury segment; the same source reports luxury rentals averaging 2.6–4%. Figures are directional and move over time. We list only cities with a figure we could verify against a source we actually read — which is why some large Indian cities are absent rather than estimated.
The spread between cities is smaller than you think
Look at the table again. India's best major metro (Bengaluru, 3.0–3.6%) and its worst (Mumbai, 2.0–2.6%) are separated by roughly 1.5 percentage points. That is a much narrower band than the "which city should I buy in?" debate implies. Every major Indian metro is, on this evidence, a low-yield market — so choosing between them on yield alone is optimising a rounding error.
What actually moves your return is the micro-market and your entry price, not the city name on the listing. A well-bought flat in Mumbai can outperform a badly-bought one in Bengaluru, and the variation between neighbourhoods within a single city routinely exceeds the variation between cities.
Why comparing to US cap rates misleads you
US residential cap rates of 5–10% are normal; the national multifamily average sat near 5.6–5.7% in 2025–26. Hold an Indian metro against that and every property fails. But the two markets are answering different questions. American cash-flow markets — Cleveland, Memphis, Birmingham — deliver income precisely because their prices have not compounded the way Indian metro prices have. You cannot have both cheap entry and violent appreciation in the same asset.
On this evidence, a strong premium-segment Indian gross yield is at or above the top of Sobha's 2.6–4% luxury-rental average. Judge a property against that, and against the Indian alternatives you would actually buy instead — not against a Cleveland duplex.
A note on why sources disagree
If you research this yourself you will find published Indian yield figures that are materially higher than the table above — some series report metro yields near 5–6%. They are not necessarily wrong; they are measuring something different. The figures here are premium/luxury segment. Other series compute citywide averages across all segments, and some derive yield from median asking rent divided by median asking price — a methodology that tends to produce higher numbers than transacted values support, because asking prices and asking rents are not struck in the same market conditions.
The dishonest move would be to average them into one confident-looking number. We cite one source, state its scope, and let you judge. When you run your own property through the calculator, you are using your actual rent and your actual price — which beats every published benchmark on this page.
Gross is advertised; net is what you receive
Gross yield ignores costs entirely, which is exactly why it appears in listings. Net yield subtracts municipal property tax, society and maintenance charges, insurance, and repairs, and typically lands 20–35% below the gross figure. A flat marketed at 4% gross may net closer to 3%. Run your own numbers through the rental yield calculator rather than trusting the headline.
What this means if you're borrowing
Here is the uncomfortable arithmetic. When your home-loan rate exceeds the rental yield — and against a 2–4% metro yield it comfortably does — the EMI is larger than the rent, and the property runs negative cash flow from day one. This is not a sign you found a bad flat. It is the structural condition of financed Indian metro rentals.
The investment case then rests on three things that a yield figure cannot show you: capital appreciation, tenant-funded principal paydown, and tax treatment — the flat 30% standard deduction on net annual value under Section 24(a), plus home-loan interest under Section 24(b) (fully deductible 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).
That is why yield alone should never decide an Indian purchase. Model the whole hold — including the eventual sale, where long-term capital gains apply after 24 months — with the rental property calculator, and sanity-check it against an index SIP using property vs SIP. If the property cannot beat a SIP after honest assumptions, the low yield was telling you something after all.