Ask three agencies what a Gurugram or Noida flat yields and you will get three answers, all of them gross, all of them calculated the same way: annual rent divided by purchase price. It is an easy number to produce and it tells you almost nothing about what you will actually receive.
The useful number is net yield, and working it out takes about ten minutes.
What gross yield leaves out
Gross yield assumes the property is let for twelve months of every year, that nothing needs repairing, that maintenance is free, and that you pay no tax. None of those is true. Here is what has to come out before the money is yours.
Vacancy
Between tenants there is a gap. Sometimes two weeks, sometimes three months if you are unlucky with timing or asking too much. A property empty for six weeks a year has already lost more than eleven per cent of its annual rent, and vacancy is the single most underestimated cost in Indian residential letting because it does not appear as a bill. It appears as an absence.
Maintenance and society dues
In a maintained condominium this is a monthly charge per square foot, and in larger developments with clubhouses, lifts and landscaping it can be substantial. In some cases it consumes a meaningful share of the rent on its own. Check whether the tenant or the owner pays it under the tenancy you are signing, because both arrangements exist and the difference is material.
Repairs and turnover costs
Paint between tenants, plumbing, fittings, appliances if the flat is let furnished. Budget something annual for this even in years when nothing breaks, because eventually it does.
Letting fees
Typically a month's rent when a new tenant is found, in some markets shared between owner and tenant. If your tenants turn over every eleven months, this is a recurring cost rather than an occasional one.
Property tax and income tax
Municipal property tax is usually modest. Income tax is not. Rental income is taxable in India at your slab rate after the standard deduction available under the house property head and any interest deduction you are entitled to. For non-resident owners, tax is generally deducted at source by the tenant before the rent reaches you, which is a mechanism many owners discover only when the first payment arrives short.
Doing the calculation
The arithmetic is simple. Take the annual rent. Multiply by your realistic occupancy. Subtract annual maintenance, an allowance for repairs, and amortised letting fees. Divide by the all-in purchase cost, not the headline price.
The denominator matters as much as the numerator. Stamp duty and registration, GST where applicable on an under-construction purchase, brokerage, legal fees, and any fit-out you paid for are all part of what the asset cost you. Using the headline price alone flatters the yield.
An illustration
The figures below are illustrative, chosen to show the shape of the calculation rather than to describe any particular property or market. Put your own numbers into the calculator and the same arithmetic runs on your figures.
| Line | Amount |
|---|---|
| All-in cost of the property | ₹1.50 Cr |
| Monthly rent | ₹42,000 |
| Annual rent at full occupancy | ₹5,04,000 |
| Gross yield | 3.36% |
| Less six weeks vacancy | −₹58,000 |
| Less maintenance at ₹6,000 a month | −₹72,000 |
| Less repairs allowance | −₹25,000 |
| Net before tax | ₹3,49,000 |
| Net yield before tax | 2.33% |
A gross figure of 3.36% becomes 2.33% before a rupee of income tax. On these illustrative numbers, roughly a third of the headline yield disappears into costs that were always going to be there.
What this means in practice
It means NCR residential is a weak income asset. That is not a criticism of the market, which does other things well. It is a statement about what this particular asset is for.
If you want income, the answer in this region is usually not a flat. Pre-leased commercial, office floors and retail produce materially better yields, with a lease structure and a corporate tenant behind them. Managed or branded residences in a genuine short-let market such as Goa are a different route to the same objective.
If you want appreciation, NCR residential can be an entirely sound choice, and the yield is close to irrelevant to that decision. What matters instead is corridor, developer and exit liquidity.
The mistake is not buying a low-yielding flat. The mistake is buying a low-yielding flat while believing you bought an income asset, and then being disappointed for ten years by an asset that was never going to do that job.
Establish which return you are buying before you look at a single property. Everything else follows from that.
This article is general information, not advice on any specific property or personal situation. A365 Realtors Private Limited is a registered real estate agent, not a registered investment adviser, and we do not provide tax or legal advice. Rates, thresholds and statutory procedures change; verify anything time-sensitive with a qualified professional before acting on it.
Make property decisions with the working shown.
Buy what stands up to five layers of scrutiny. Then let someone else deal with the tenants.