Rental Yield and Cap Rate Calculator
Residential property in India yields far less than owners expect. Commercial property is bought on yield. This works out both, and values the property from its income.
These are approximate numbers worked out from what you entered. For an exact, government approved valuation report that a bank, court, tax officer or embassy will accept, talk to us.
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Gross yield, net yield, and why they differ so much
Gross yield is annual rent divided by value. It is the number quoted in conversation and it flatters every property.
Net yield subtracts what actually leaves your hand. Society maintenance, property tax, repairs, brokerage on each new tenant, and the months the flat sits empty between tenants.
On a typical Delhi flat, a gross yield near 3 percent becomes a net yield closer to 2 percent once those are honest. That is the number to compare against a fixed deposit, not the gross one.
Why Indian residential yields look so low
Because buyers are not really buying an income. They are buying an asset they expect to appreciate, in a location they want, that they can live in or hand to a child.
Rents are set by what tenants can pay from salaries. Prices are set by what buyers will pay from savings, loans and expectations. Those two forces have drifted apart in every large Indian city, and the yield is simply the gap between them expressed as a percentage.
Commercial property behaves differently. A shop or an office is bought largely for its income, yields run considerably higher, and the income method carries real weight in the valuation.
What a capitalisation rate is
The cap rate is the yield a buyer of that kind of asset expects. Divide the net operating income by the cap rate and you get what the income alone is worth.
A prime office let to a strong tenant on a long lease attracts a low cap rate, because the income is safe, and therefore a high value. A shed in a weak location with an uncertain tenant attracts a high cap rate and a low value from the same rent.
This is one of the four recognised valuation methods, and for commercial property it is often the primary one. The four methods are explained here.
What a valuer checks that a calculator cannot
Whether the rent is a real market rent or a friendly one between related parties. How long the lease has left and what the escalation clause says. Whether the tenant is actually paying. Whether the tenancy is protected under old rent control law, which can devastate the value of an otherwise good building.
That last one still bites in parts of Delhi, Mumbai and Kolkata, and owners are often unaware until they try to sell.
Questions people ask us
- What is a good rental yield in India?
Residential typically runs 2 to 3.5 percent gross and less after costs. Commercial usually runs 6 to 9 percent. If a residential property is quoted at a much higher yield, check whether the rent or the value is the unusual number.
- What is the difference between yield and cap rate?
Yield describes a property you own, working from its rent and its value. A cap rate is the return a buyer of that asset class expects, and you use it in reverse to value a property from its income.
- Do valuers use the income method for flats?
Rarely as the main method. For residential property, comparable sales give the more reliable answer. Income capitalisation comes into its own for commercial and tenanted property.
- Does a sitting tenant reduce the value?
It can, substantially, if the tenancy is protected under old rent control law or the lease is long at a below market rent. A valuer checks the tenancy documents rather than only the rent figure.
Checked by Parish Rao, Chartered Engineer and Government Approved Valuer.
Page last checked on 27 August 2026.