Hyderabad leads the list of cities with maximum rental yields across the country.
According to a report by Anarock Property Consultants, rental yield of Hyderabad is 3.7 per cent followed by Bengaluru with 3.6 per cent. Rental yield in Pune is 3.3 per cent while the entire Mumbai Metropolitan Region, or MMR, is 3 per cent.
Rental yield is the annual rate of return an investor can earn from his capital invested in a property.
According to Director and head of research at Anarock Property Consultants Prashant Thakur, though the rental market increased at a slow pace across all the major cities in India, rental yield has remained constant at a national average of 3 per cent.
The rental yields in India are higher than that in Beijing, Singapore and Hong Kong. However, the rental yields are lower than Manila and Jakarta, Ananrock said.
The Indian rental yield average of 3 per cent is less than the other Asian countries which are pegged at 3.5 – 4 per cent and European countries at 4.5 – 5 per cent, the report added.
The rental yield is inversely proportional to property cost, which means that the lower the cost of the property be the higher is the rental. This means that an investment in affordable or mid-segment properties will give better rental returns, though it depends on several factors such as project type, location and realtor’s brand.
Luxury and super-luxury homes have comparatively lower rental yields.
Thakur said demand for rental properties is largely driven by the salaried population. A major chunk of tenants in Bengaluru, Hyderabad, Pune and Mumbai are from the salaried segment and belong to industries such as information technology, pharma and services.
He added that IT, IT-enabled services and BPO sectors are the key drivers for commercial space in cities such as Bengaluru, Hyderabad, Pune and Chennai. He said these sectors were the reasons behind steady migration in these cities, leading to a steady rise in the rental housing market.