Rental yield is the return on investment a property generates through rental income, measured as a percentage of its value. As India’s real estate market continues to grow, cities like Bangalore, Hyderabad, Pune, and Gurugram stand out for their high rental yield in India driven by strong job markets and rising housing demand.
Investing in these cities can offer stable rental income and long-term capital appreciation. In this blog, we will read on to explore the top 11 high-yield cities to invest in India in 2025!
Current Rental Market Landscape in India
India’s rental market in 2025 is witnessing rapid transformations, where urban migration, economic expansion, and evolving housing preferences play a major role. With cities like Mumbai, Bengaluru, Delhi NCR, Pune, Hyderabad, Chennai, and Kolkata experiencing a surge in rental demand, the real estate landscape is becoming increasingly competitive.
Rising rents and supply-demand gaps create both opportunities and challenges for tenants and investors.
High Demand
IT and corporate hubs like Bengaluru, Hyderabad, Pune, and Gurugram have an all-time high rental demand in India. The influx of professionals, students, and migrants who are looking for better job prospects and education is driving up the occupancy rates. Also after COVID-19, the return to office work, hybrid models, and increased startup activity has further intensified demand, making well-located rental properties highly sought after.
Variations by Location
In India, Mumbai and Delhi NCR have seen rental growth of approximately 8% since 2019, and Bengaluru meanwhile has witnessed a modest 2% rise. Prime locations in Hyderabad, Chennai, and Pune continue to experience steady rental appreciation, while suburban and emerging areas still offer affordable options. Tier-2 cities such as Indore, Lucknow, and Coimbatore are also gaining traction as rental hubs due to affordability and improving infrastructure.
Rising Rents
Rental values in India’s top cities have climbed up to 72% between 2021 and mid-2024, mainly due to increasing demand and limited supply. Metro cities like Mumbai, Bengaluru, and Gurugram have seen double-digit rental hikes in premium locations, with some areas recording year-on-year rent increases of 10–15%. The rising cost of living and inflationary pressures have further contributed to higher rental costs, making affordability a growing concern for tenants.
Limited Supply
Despite of surge in demand, rental property supply remains constrained, leading to soaring rents and limited availability. Developers are focusing on high-end luxury projects, leaving a shortage of mid-range and affordable rental housing. Land scarcity in Mumbai, delays in new residential projects in Bengaluru, and limited infrastructure expansion in Delhi NCR are worsening the supply crunch. As a result, tenants are forced to compromise on location, property size, or rental budgets.
Also Read: Top 5 Places to Purchase Property in Bengaluru
Analysis of Residential Rental Yield in Top 11 Cities in India
As we move forward in 2025 we see India’s rental market is showing notable variations across its major cities which are influenced by the economic growth, infrastructure development, and demand-supply dynamics. Below is an overview of the top 11 cities, highlighting their rental yields and contributing factors.
1. Bengaluru
Known as India’s “Silicon Valley“, Bengaluru’s robust IT industry attracts professionals, leading to high rental demand. In Q1 2024, the city recorded a rental yield of 4.45%, up from 3.6% in 2019. Prime areas like Sarjapur Road and Whitefield saw rental increases of 8% each in Q1 2024.
Also Read: Upcoming Projects in Sarjapur
2. Mumbai
Also called the “Financial Hub“, Mumbai’s diverse economy sustains strong rental demand. The city achieved a rental yield of 4.15% in Q1 2024, rising from 3.5% in 2019. Suburbs such as Chembur and Mulund experienced a 4% growth in rental rates during the same period.
Also Read: Top Places to Buy a Home in Mumbai in 2025
3. Gurugram
Adjacent to Delhi and having DLF as a big real estate giant in the backdrop, Gurugram hosts numerous multinational corporations, bolstering its rental market. The city reported a rental yield of 4.1% in Q1 2024, an increase from 3.5% in 2019.
Read More: Why to Invest in DLF Share Price
4. Pune
Also called the “Manufacturing Hub of India“, The thriving IT and the educational sector has strengthened the rental market in Pune city. The city recorded a rental yield of 4.35% in Q1 2024, up from 3.1% in 2019.
Also Read: Pune’s Real Estate Market Predictions for 2025
5. Noida
Being a Part of the National Capital (Delhi) Region, Noida’s infrastructure and commercial growth have enhanced its rental appeal. The city saw a rental yield of 3.75% in Q1 2024, rising from 3.0% in 2019.
Read More: Cost of Living in Noida
6. Delhi
The “National Capital of India“, Delhi offers a mix of residential options, with rental yields reaching 2.8% in Q1 2024, up from 2.1% in 2019.
Also Read: Best Places to Buy a Home in Delhi
7. Chennai
A major industrial and IT hub, Chennai’s rental market is stable. The city reported a rental yield of 4.05% in Q1 2024, increasing from 2.5% in 2019.
Read More: Cost of Living in Chennai
8. Hyderabad
Also known as “Cyberabad” and for its burgeoning IT sector, Hyderabad’s rental demand is on the rise. The city experienced a rental yield of 3.35% in Q1 2024, up from 3.0% in 2019.
Also Read: Home Loan Options in Hyderabad
9. Kolkata
As an emerging market, Kolkata offers competitive rental yields. The city recorded a yield of 3.15% in Q1 2024, up from 2.5% in 2019.
Also Read: Cost of Living in Kolkata in 2025
10. Navi Mumbai
A planned township, Navi Mumbai provides affordable housing options. The area saw improvements in rental yields compared to pre-pandemic times.
Read More: Navi Mumbai Municipal Corporation (NMMC) Property Tax in 2025
11. Thane
Located near Mumbai, Thane has seen enhancements in rental yields post-pandemic.
Read More: How to Pay Thane Property Tax Online?
The below table summarizes the residential rental yields (%) for the top 11 cities from 2023 to 2025:
| City | 2023 | 2024 | 2025* |
|---|---|---|---|
| Bengaluru | 4.05 | 4.45 | 4.8 |
| Mumbai | 3.9 | 4.15 | 4.3 |
| Gurugram | 3.8 | 4.1 | 4.3 |
| Pune | 3.7 | 4.35 | 4.5 |
| Noida | 3.45 | 3.75 | 4.0 |
| Delhi | 2.65 | 2.8 | 3.0 |
| Chennai | 3.1 | 4.05 | 4.2 |
| Hyderabad | 3.65 | 3.35 | 3.5 |
| Kolkata | 3.0 | 3.15 | 3.3 |
| Navi Mumbai | N/A | N/A | N/A |
| Thane | N/A | N/A | N/A |
Source: Rental Market Yield in Top Cities
Market Trends in 2025
- Home prices are projected to increase by 6.5% in 2025, driven primarily by demand from affluent buyers.
- The surge in property prices is widening the affordability gap, making homeownership increasingly difficult for middle and lower-income groups.
- As purchasing homes becomes less attainable, more individuals are opting to rent, leading to a projected 7.5% to 10% rise in rental rates over the coming year.
- Developers are focusing on premium and high-end housing, resulting in a shortage of affordable homes and further driving up rents.
- In cities like Bengaluru, areas like Whitefield, Sarjapur Road, Koramangala, Hebbal, and Indiranagar have experienced a significant rent increase, with some localities witnessing hikes of up to 30% over the past two years.
Source: Luxury Property to Drive Home Prices in India by Reuters
Comparing Different Types of Rental Property in Terms of Rental Yield
Rental yield is a crucial factor for investors evaluating different property types. The type of rental property significantly impacts profitability, maintenance costs, and management efforts. Below are the mentioned ones:
Multi-Unit Buildings
Multi-unit buildings generate strong rental yields as multiple units can be rented out simultaneously, reducing vacancy risks. They are ideal for investors looking for stable and diversified income streams.
However, managing multiple tenants increases complexity, and maintenance costs are generally higher. Resale value can also be a challenge.
Apartments
Apartments are easy to manage with lower maintenance costs, making them a preferred choice for investors. They attract tenants due to prime locations, accessibility to public transport, and amenities.
However, rental yields tend to be lower than single-family homes, and additional expenses like association fees can impact profitability.
Single-Family Homes
Single-family homes offer higher rental yields due to more space, privacy, and tenant demand. They generally have better resale value than apartments.
However, they come with higher operational costs, including maintenance, repairs, and insurance, and require more hands-on management.
Vacation Homes
Vacation homes can deliver higher short-term rental yields in tourist-heavy areas. They require constant management, seasonal demand fluctuations, and higher maintenance costs.
However, off-season vacancies can significantly impact profitability, making them a riskier investment in certain locations.
Townhouses
Townhouses provide a balance between single-family homes and apartments by offering more privacy and space while maintaining relatively lower maintenance costs and usually having a better resale value than apartments.
However, higher association fees and shared walls make them less desirable compared to independent homes.
| Property Type | Pros | Cons |
|---|---|---|
| Multi-Unit Buildings | Strong rental yield, multiple tenants reduce risk | Complex management, high maintenance, resale challenges |
| Apartments | Easy to manage, lower operating costs | Complex management, high maintenance, resale challenges |
| Single-Family Homes | Higher rental yields, better resale value | Higher maintenance costs, more management required |
| Vacation Homes | Higher rental yields in tourist areas | Seasonal demand, high maintenance, management-intensive |
| Townhouses | More space, better resale value than apartments | Higher association fees, less private than single-family homes |
Analysis of Commercial Rental Yield In India (2025)
India’s commercial sector is poised for significant growth in 2025, with total supply expected to increase by 5-6% year-on-year in the financial year 2025-26. This expansion is driven by a robust economy, infrastructural advancements, and a thriving business environment.
Key Factors Influencing Commercial Rental Yields
- Economic Growth: India’s GDP is projected to grow between 6.5-7.0% in FY2024-25, bolstering demand for commercial spaces. The experts also predict similar growth numbers for FY 2025-26.
- Global Capability Centers (GCCs): GCCs are anticipated to account for 40-50% of leasing activity, increasing demand for Grade-A office spaces.
- Flexible Workspaces: There’s a 30% annual growth in demand for flexible office spaces, as businesses seek cost-effective and adaptable solutions.
- Sustainability Focus: Approximately 80% of upcoming commercial properties are expected to be green-certified, reflecting a shift towards sustainable development.
Projected Commercial Rental Yields in Major Indian Cities for 2025:
| City | Projected Rental Yield |
|---|---|
| Delhi NCR | 8.0% |
| Mumbai | 7.75% |
| Bengaluru | 7.75% |
| Hyderabad | 7.5% |
| Chennai | 7.0% |
Investing in commercial properties in these cities offers higher rental yields compared to residential properties, which typically yield around 3%. However, potential investors should consider factors such as location, property type, tenant profile, and market dynamics to maximize returns.
Commercial Real Estate Rental Yield in India
| Parameter | Commercial Properties | Residential Properties |
|---|---|---|
| Rental Yield | 8-11% | 1.5-3.5% |
| Capital Appreciation | 5-10% | 1-3% |
| Net Rental Yield | 7-8% | 2-3% or lower |
| Lease Agreements | Long-term, stable returns | Short-term, lower stability |
Source: Rental Yield Analysis in India
Analyzing Rental Yield in Indian Office Space Market in Q3 2024
- Gross leasing activity in India’s office space market reached 19.89 million sq ft in Q3 2024, marking the second-highest quarterly volume recorded.
- Net absorption rose to 12.16 million sq ft, showing a 13.7% year-over-year growth and 14.9% increase quarter-over-quarter.
- New office completions stood at 13.84 million sq ft, the highest in 2024 so far, though down 4.1% year-over-year.
- Overall vacancy rates declined to 16.9%, reflecting tightening supply in key business districts.
- Rental prices across major cities increased by 3.5% year-over-year, driven by strong leasing demand and limited supply of premium office spaces.
- Bengaluru led leasing activity with a 24.6% share, followed by Delhi NCR at 23.1%, indicating sustained demand in IT and business hubs.
- Flex space accounted for 22.7% of leasing in Q3 2024, surpassing tech companies and financial services, signaling shifting workspace preferences.
- Projected gross leasing for 2024 is expected to exceed 70 million sq ft, making it a record-breaking year for India’s office space market.
Source: Indian Office Market Dynamics by JLL India
Understanding Impact on ROI when Rental Yield Increases
An increase in rental yield directly boosts ROI by enhancing cash flow, improving profitability, and accelerating investment recovery. Higher yields also make properties more attractive to investors, leading to potential capital appreciation and long-term financial gains.
How to Calculate Rental Yield?
Calculating rental yield is essential for evaluating the profitability of an investment property. It involves a straightforward process that helps determine the percentage return a property generates based on its rental income and market value.
Steps to Calculate Rental Yield:
- Calculate the total rent the property earns in a year.
- Identify the property’s current market price.
- Divide the annual rental income by the property’s market value.
- Multiply the result by 100 to express it as a percentage.
Types of Rental Yield Calculation
There are two ways to calculate rental yield:
- Gross Rental Yield:
This provides a general estimate of the return before considering any expenses.
Formula: Gross Rental Yield = (Annual Rental Income/Property Value) x 100
2. Net Rental Yield:
It is a more accurate calculation that considers maintenance, property taxes, and other expenses.
Formula: Net Rental Yield = ((Annual Rental Income – Expenses)/Property value) x 100
Example
Scenario: A property in Delhi is purchased for ₹75 lakh and generates a monthly rent of ₹25,000, making the annual rental income ₹3,00,000.
Annual expenses total is ₹50,000.
Gross Rental Yield Calculation: (3,00,000/75,00,000) × 100 = 4%
Net Rental Yield Calculation: ((3,00,000 – 50,000)/75,000) × 100 = 3.33%
Read More: Why to Use a Rental Yield Calculator
5 Factors Affecting Rental Yield In India
Understanding the key factors that impact rental returns is essential for investors looking to maximize their earnings. Various elements, such as location, property type, and government policies, influence rental income. Here are five crucial factors affecting rental yield in India.
1. Location and Connectivity
The neighborhood and proximity to commercial hubs, educational institutions, and transport facilities play a crucial role in determining rental yield. Properties in well-connected urban centers typically demand higher rents than those in suburban or less developed areas.
Example: A 2BHK apartment in Cyber Hub, Gurugram, will likely generate a better rental return than a similar unit in Manesar due to better connectivity, business presence, and infrastructure.
2. Property Type and Demand
The type and size of the property must align with market demand. Studio apartments and 2BHK units generally yield higher rental returns in metro cities due to affordability and high tenant preference. On the other hand, large villas or luxury properties may struggle with lower occupancy rates.
Example: A compact 1BHK in Powai, Mumbai, may yield better rental income compared to a sprawling villa in Panvel, as young professionals prefer affordable homes near business districts.
3. Property Maintenance and Amenities
Well-maintained properties with modern amenities attract quality tenants and command higher rents. Features such as security systems, elevators, power backup, and recreational spaces enhance a property’s desirability, thereby boosting rental yield.
Example: A gated society flat in Salt Lake, Kolkata, with amenities like a gym and clubhouse, will have better rental demand than an older, poorly maintained standalone building in the same locality.
4. Tenant Profile and Stability
A stable and reliable tenant base ensures consistent rental income. Properties catering to working professionals, corporate tenants, and families tend to have lower vacancy rates and better rental appreciation. Short-term tenants, such as students or tourists, may lead to frequent turnovers and maintenance issues.
Example: A 3BHK apartment in Hinjewadi, Pune, rented to IT professionals will likely generate better returns than one leased to students in the same area, as professionals usually prefer long-term stays.
5. Government Regulations and Taxation
Rental laws, taxation policies, and government schemes impact rental earnings. Rent control laws in some states may cap rental prices, limiting potential returns. Additionally, tax incentives for rental property owners can either encourage or deter investments.
Example: In Tamil Nadu, the Model Tenancy Act has helped create a more landlord-friendly rental environment, whereas rent control laws in cities like Delhi may restrict rental growth, affecting returns.
How to Increase Your Rental Income through Effective Property Management
Increasing rental income requires smart property management strategies that minimize costs and boost revenue. By setting the right rent price, reducing vacancy rates, and enhancing property value, landlords can significantly increase their returns. Here are the following Tips:
- 5 Tips for Reducing Vacancy Rates and Increasing Occupancy
| S.No. | Tip | Description |
|---|---|---|
| 1. | Offer Attractive Incentives | Provide discounts on long-term leases or waive fees to attract tenants. |
| 2. | Leverage Online Marketing | Use property listing platforms and social media for wider reach. |
| 3. | Enhance Tenant Experience | Respond promptly to inquiries and resolve issues quickly. |
| 4. | Network with Other Landlords | Connect with property owners to find potential tenants. |
| 5. | Ensure Competitive Pricing | Monitor market trends to keep rent rates attractive. |
- 5 Tips for Setting the Right Rent Price for a Property
| S.No. | Factor | Key Consideration |
|---|---|---|
| 1. | Market Trends Analysis | Compare similar properties to set a competitive rent. |
| 2. | Property Condition & Features | Modern amenities and upgrades justify higher rent. |
| 3. | Tenant Demographics | Align pricing with target tenants’ budget and lifestyle. |
| 4. | Demand Monitoring | Adjust rent based on market demand fluctuations. |
| 5. | Periodic Price Review | Update rent based on market shifts and economic factors. |
- 5 Tips to Improve the Value of a Rental Property
| S.No. | Tip | Description |
|---|---|---|
| 1. | Invest in Property Upgrades | Simple renovations (e.g., flooring, fixtures) boost rental value. |
| 2. | Enhance Curb Appeal | Well-maintained exteriors create a strong first impression. |
| 3. | Add Desirable Amenities | High-speed internet, smart tech, or a gym increase appeal. |
| 4. | Stage for Maximum Appeal | Furnished, aesthetically pleasing interiors attract tenants. |
| 5. | Maintain and Clean Regularly | Proper upkeep prevents costly repairs and attracts tenants. |
Also Read: How to Save Income Tax on Rental Income
Conclusion
Maximizing rental yield in India requires strategic property investments, effective management, and market analysis. Investors can enhance returns by choosing high-yield locations, optimizing rental pricing, and maintaining properties well. Understanding market trends, commercial and residential rental dynamics, and factors influencing yield ensures smarter investment decisions.
Frequently Asked Questions
Rental yield is the annual rental income expressed as a percentage of the property’s purchase price. It helps investors assess profitability, with higher yields indicating better returns. It is calculated as (Annual Rent / Property Price) × 100.
Indian cities with the highest rental yield include Hyderabad, Pune, Bangalore, and Ahmedabad, offering yields between 3% to 5%. Tier-2 cities like Indore and Kochi are also gaining traction due to lower property prices and rising rental demand.
The 4% rule suggests that a rental property should generate at least 4% of its purchase price annually in rental income. This benchmark helps investors determine profitability and assess whether a property provides sustainable rental returns over time.
The average rental yield in India ranges from 2% to 3.5%, while Bangalore offers 3% to 4.5%, depending on location and property type. Prime areas yield lower returns, whereas emerging localities offer higher rental yields due to growing demand and lower property costs.
Key factors include location, demand, rental yield, property appreciation, maintenance costs, legal regulations, and tenant preferences. Proximity to offices, transport hubs, and educational institutions significantly impacts rental demand and potential returns.
Buying is preferable for long-term wealth creation, appreciation, and rental income. Renting suits those seeking flexibility and avoiding maintenance costs. The choice depends on financial goals, market conditions, and investment horizon.
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