The Indian real estate market has long been a cornerstone of wealth creation, attracting investors with promises of steady rental income and long-term capital appreciation. As we stand in February 2025, the question on many investors’ minds is: What is the average rental yields in India this year, and how does it shape investment decisions? In this blog, we’ll dive into the latest data, explore regional variations, analyze influencing factors, and offer insights into what 2025 holds for rental yields across residential and commercial properties.
What is Rental Yields?
Before we delve into the numbers, let’s clarify what rental yield means. Rental yield is a key metric for property investors, representing the annual return on investment (ROI) generated from rental income. It’s calculated as:
- Gross Rental Yield = (Annual Rental Income / Property Purchase Price) × 100
- Net Rental Yield = ((Annual Rental Income – Annual Expenses) / Property Purchase Price) × 100
For example, if a property worth ₹1 crore generates an annual rental income of ₹4 lakhs, the rental yield would be 4%.
Gross yield provides a quick snapshot, while net yield accounts for maintenance, taxes, and other costs, offering a more realistic picture of profitability. In India, yields have historically been modest compared to global peers, but recent years have seen shifts driven by economic recovery, urbanization, and evolving work patterns.
The Current Landscape: Rental Yields in 2025
As of February 20, 2025, the most recent data available stems from Q3 2024, with projections for 2025 based on ongoing trends. According to the Global Property Guide, the average gross rental yields across India stood at 4.98% in Q3 2024, up from 4.39% in Q1 2024. This upward trajectory reflects rising rental demand in key cities, fueled by post-pandemic office reopenings and migration to urban centers.
For 2025, industry experts anticipate a modest increase, with the average gross rental yields likely hovering between 5.0% and 5.5%, assuming stable economic growth and continued urbanization. This projection aligns with forecasts from sources that suggest rental demand will remain robust, supported by government initiatives like the PM Awas Yojana Urban 2.0 and a strong GDP growth outlook (6.5% as per IMF estimates for 2025).
Residential Rental Yields: City-Wise Breakdown
Rental yields in India vary significantly across cities and property types. Here’s a snapshot of residential yields in major urban centers based on the latest data and 2025 projections:
- Bengaluru: Known as India’s Silicon Valley, Bengaluru topped the charts with a gross rental yield of 4.45% in Q1 2024 (ANAROCK). By 2025, this could rise to 4.8%–5.0%, driven by IT sector growth and soaring demand in areas like Sarjapur Road and Whitefield, where rents jumped 8% in Q1 2024 alone.
- Mumbai: The financial capital recorded a yield of 4.15% in Q1 2024, up from 3.5% in 2019. With high property prices tempering yields, 2025 projections suggest a range of 4.3%–4.6%, bolstered by demand in suburbs like Chembur and Mulund.
- Delhi-NCR: Delhi led with a yield of 6% in July 2023 (Statista), but the broader NCR region averages lower. In 2025, expect yields around 5.2%–5.5%, with hotspots like Noida’s Sector 150 seeing rental hikes of 9% in Q1 2024.
- Kolkata: Offering 5% in July 2023, Kolkata remains a high-yield market due to lower property prices. Projections for 2025 suggest 5.0%–5.3%, with areas like Rajarhat driving growth.
- Hyderabad: With yields at 3.8% in Q2 2024 (Magicbricks), Hyderabad could see 4.0%–4.5% in 2025, thanks to IT hubs like Gachibowli and HITECH City.
- Pune and Ahmedabad: Both cities reported 3.8% in Q2 2024, with 2025 estimates around 4.0%–4.3%, reflecting steady demand from IT and industrial sectors.
Historically, residential yields in India hovered around 3% pre-pandemic, making this uptick noteworthy. However, they remain lower than global benchmarks like Dubai (6–7%) or New York (5–6%), largely due to high property prices relative to rents.
Commercial vs. Residential: A Yield Comparison
While residential properties dominate real estate discussions, commercial properties often outshine them in yield potential. In 2025, commercial real estate—particularly Grade-A office spaces and retail units—promises higher returns:
- Office Spaces: Average yields range from 6%–8% in Q1 2024 (Assetmonk), with 2025 projections at 7%–9%. Cities like Bengaluru, Gurugram, and Mumbai lead, driven by back-to-office trends and a thriving domestic economy.
- Retail Units: High streets and malls offer 8%–9% yields (Assetmonk), potentially reaching 9%–10% in 2025, as consumer spending rebounds.
- Residential: As noted, yields average 5.0%–5.5%, lagging behind commercial assets due to shorter lease terms and higher maintenance costs.
The gap is attributed to longer lease agreements and higher rental rates in commercial properties, making them a compelling choice for yield-focused investors.
Factors Influencing Rental Yields in 2025
Several dynamics will shape rental yields this year:
- Economic Growth: India’s projected GDP growth of 6.5% in 2025 (IMF) supports job creation and urban migration, boosting rental demand.
- Supply and Demand: New housing supply (531,470 units expected in 2024, per ANAROCK) may temper rent growth in oversupplied markets like MMR, while undersupplied IT hubs see sharper increases.
- Remote Work Trends: Hybrid work models influence demand for larger homes in suburbs, potentially lowering yields in city centers.
- Policy Support: Initiatives like the Draft Model Tenancy Act and budget allocations for rental housing could enhance yields by formalizing the market.
- Inflation and Interest Rates: Rising construction costs and home loan rates (7–8% vs. 3–5% in developed nations) increase property prices, compressing yields unless rents keep pace.
Maximizing Rental Yields in 2025
For investors, achieving above-average yields requires strategy:
- Location Matters: Focus on high-demand areas near employment hubs, universities, or metro corridors (e.g., Bengaluru’s Whitefield, and Mumbai’s Bandra West).
- Property Type: Opt for apartments over villas, as they offer higher yields (3.1% vs. 2.4%, per Magicbricks 2018 data, a trend likely persisting).
- Commercial Investment: Explore office or retail spaces via fractional ownership platforms for higher returns with lower entry costs.
- Research and Timing: Analyze micro-market trends—e.g., rental inflation in Hyderabad (16%–25% in 2024, NoBroker)—to buy at optimal price points.
Challenges and Risks
Despite the optimism, challenges persist. High property prices, low rent-to-price ratios, and tenant-friendly rental laws (e.g., legacy disputes) keep net yields modest, often 2%–3% after expenses. Additionally, oversupply in some markets could cap rental growth, while economic slowdowns might dampen demand.
Conclusion: What Lies Ahead?
In 2025, India’s average rental yield is poised to settle around 5.0%–5.5% for residential properties, with commercial assets offering 7%–10%. This marks a recovery from pre-pandemic levels (3%) and reflects a maturing market. For investors, the key is balancing yield with appreciation potential—cities like Bengaluru and Delhi-NCR offer both, while commercial properties present a high-yield alternative.
As India’s real estate sector eyes a $1 trillion valuation by 2030 (IBEF), rental yields will remain a critical barometer of investment viability. Whether you’re a seasoned landlord or a first-time buyer, staying informed about local trends and leveraging data-driven decisions will be crucial to thriving in this dynamic landscape. What’s your take—will 2025 be the year rental yields finally take off in India? Let’s discuss it!
Note: It’s important to note that these are approximate ranges. Actual rental yields can vary significantly depending on the specific location, property type, and market conditions.
