Gross Rental Yield
Gross Yield is the simplest measure of return. It is calculated as (Annual Rent / Property Value) × 100. It is useful for quickly screening properties but ignores costs. A gross yield of 2-3% is typical for residential property in Indian metros.
Net Rental Yield
Net Yield is the gold standard metric. It deducts all operating expenses (taxes, maintenance, insurance, vacancy) from the rent before dividing by the property value. This figure tells you what you actually keep in your pocket.
Cash Flow
Cash Flow is the net amount of money moving in or out of your pocket each month. Rent - (Expenses + EMI). Positive cash flow means the asset pays you; negative cash flow means you are feeding the asset.
Vacancy Rate
The Vacancy Rate is the percentage of time a property sits empty during a year. A 5% vacancy rate implies the property is unrented for about 18 days a year. Ignoring this leads to overestimating income.
Standard Deduction (30%)
Under Indian Income Tax laws (Section 24a), you are allowed a flat 30% deduction from your Net Annual Value (Rent - Municipal Taxes) for repairs and maintenance, regardless of your actual expenditure.
REITs (Real Estate Investment Trusts)
REITs are like mutual funds for real estate. They allow you to invest in high-grade commercial properties with small amounts (e.g., ₹300-400) and earn a dividend yield, often ranging from 6-8%.
Stamp Duty & Registration
Stamp Duty is a government tax paid when buying property. It is a significant upfront cost (often 5-7% of value) that must be added to your total investment cost to calculate an accurate yield.