There are numerous opportunities for real estate investment in 2021. Property prices in major cities that had remained unchanged have begun to show some positive shifts.
Rentals are one of the best ways to generate passive income, but the understanding rental yield is the best way to ensure that you get the most out of your real estate investment. Real estate investors in India are looking for capital appreciation rather than rental income. Rents have not risen in proportion to housing prices, resulting in a low rental yield.
Rental Yield is defined as the ratio of the property’s annual rent to its total cost. In general, a 3–5% gross rental yield for apartments is considered an average expectation in India and is common in most cities. Individual homes typically have a higher rental yield. Commercial properties typically have a rental yield of 6–10%. Along with these two rental yield classifications, a new segment has emerged from co-working spaces, student housing, and warehousing.
To get a higher rental yield, you must first decide whether to invest in a commercial or residential property. Check the vacancy rates in the area depending on the location. Some key points to keep in mind if you want to increase your rental yields are:
- Invest in a low-cost home to increase your rental yield.
- Invest in co-living arrangements.
- Invest in niche markets.
Different metropolitan Cities and their Rental Yield
Hyderabad is one of the most cost-effective cities in which to invest in real estate. The two most important factors for real estate investment in Hyderabad are the low cost of living and the excellent infrastructure making it one of the main destinations for rental investment. NH-163, NH-765, NH-44, NH-65, The South and Central Railway Zones, as well as Rajiv Gandhi International Airport, provide excellent transportation options.
Because of this strong track record, 9,349 new products were launched in the first quarter of 2021, resulting in an 80 percent increase in sales. This demonstrates Hyderabad’s popularity for real estate investment in India.
Mumbai’s dream city offers rental properties in all price ranges, with over 62,270 units listed for rent. The majority of available units are two-bedroom, but one-room kitchen (1RK) accommodations are also popular, especially among those looking to live on a budget. Inexpensive locations: 2BHKs are affordable in Thane, Palghar, Mira Road East, Dombivali East, Virar, and Panvel. These are priced between Rs 15,000 and Rs 15,000 per month, depending on the unit size, exact location, amenities, and so on.
Spacious 2BHK properties are available in Malad East, Ghansoli, Juhu, Agripada, Bandra West, and other areas which cost up to Rs 4 lakh per month. Three-bedroom and larger configurations can command monthly rents of up to Rs 15 lakhs. Chembur, Prabhadevi, Carter Road, Tardeo, and Napean Sea Road are among the top localities with rental properties currently listed, according to Assetmonk data.
In Delhi, there are currently over 27,000 rental units available. 3BHK units are comparatively more popular than smaller units in Delhi, as their price ranges between Rs 5,000/- per month to Rs 11 lakhs. Paschim Vihar, Jangpura, parts of Dwarka, Nizamuddin, and Kundli are some areas where you can find properties for rent at affordable rents of up to Rs 20,000 per month.
Luxury locations: Some of the high-end properties can be found in Delhi’s hotspots such as Chanakyapuri, Greater Kailash, Vasant Vihar, Hauz Khas, Punjabi Bagh, Jor Bagh, and others. Rents can reach Rs 25 lakh per month, but these are large properties, mostly independent houses, villas, and opulent apartments.
The garden city has nearly 15,000 available rental units. One-bedroom and two-bedroom apartments are equally popular. Affordability: Rajarajeshwari Nagar, Doddaballapur, LHR Layout, MS Palya Road, and other nearby areas offer affordable rental units. You could find reasonably priced 2BHK units starting at Rs 6,000 per month.
Luxury locations: Given that 2BHKs are the most quickly sold in any market, some of the most expensive properties can be found in Frazer Town, ISRO Layout, Indira Nagar, Marathahalli, and other areas. A 2BHK unit can cost up to Rs 5 lakh per month in rent.
The Tamil Nadu capital is primarily an end-user-driven market, making it less susceptible to speculation. North Chennai is primarily industrial, whereas central Chennai is the city’s most developed area, with well-established commercial and residential markets. South and West Chennai, which were previously primarily residential areas, are quickly becoming commercial zones, with many IT and financial services companies located there.
Nodes like Perungudi, Sholinganallur, and Siruseri, as well as GST Road, have created a plethora of job opportunities in south Chennai. The state government’s focus on providing excellent road connectivity along these nodes has aided in the development of this region.
Kochi is not only on the government’s list of smart cities, but it is also on the radar of many new IT companies. Aside from being Kerala’s commercial center, recent developments like the privatization of the international airport and the upgrading of the seaport have improved the city’s real estate prospects.
NRIs have traditionally driven residential real estate in Kochi. Only 30% of end-users are locals. Despite a drop in NRI investments over the last two years, housing demand remains strong.
The city has seen significant infrastructure development. A metro corridor, the operation of mobility hubs, the expansion of IT parks, and the development of the Amballur village’s Electronic Park are all on the agenda.
With a budget of Rs 50 lakh, you can buy a home in Kakkanad, Thripunithura, Maradu, or Aluva. Properties in Edapally, Kaloor, and Vytilla can be purchased for less than Rs 75 lakh. Property in Marine Drive, Panampally Nagar, and Kadavanthra can cost more than Rs 1 crore.
The city’s proximity to Mumbai, as well as a thriving education, engineering, automobile, and information technology scene, have accelerated real estate activity in this once sleepy city. The Mumbai-Pune Expressway has made Pune a popular destination for out-of-town investors, while the year-round pleasant weather makes it a popular choice for homebuyers.
In the last five years, the Pune real estate market has gone from being average to one of the best. Pune has a wide range of properties to suit both end-users and investors. In the affordable segment, prices range from Rs 15 to Rs 30 lakh.
Premium projects start at Rs 1.3 crore, while luxury projects can cost up to Rs 2.5 crore. The upcoming areas to scout in Pune are Vishrantwadi, Dhanori, Kharadi, and Whagoli in the east, and Wakad, Hinjewadi, Ravet, and Tathawade in the west.
Best cities for commercial rental yield
According to a report by global property consultancy, Bengaluru, Mumbai, and Delhi have the highest rental yield for office space among the world’s 20 leading business cities. According to the Global Cities-2016 report, Bengaluru has a rental yield of 10.5 percent, while Mumbai and Delhi have rental yields of 10% and 9%, respectively.
The rental yield is simply the annual rental income you earn expressed as a percentage of the property purchase price. According to the report, the annual rental income earned from office properties in these three cities is the highest among leading business centers, as a percentage of the property price.
These three cities are far ahead of other global cities with rental yields of 4%, such as London and New York. Office properties are a good investment because of their high rental yield. According to the reports, the robust growth in rental yields in India is being attributed to expanding e-commerce firms and start-ups, which are driving up demand for office space in the country.
IT and IT-enabled services (ITes) sectors, banking and financial services, and manufacturing firms have all contributed to the strong demand. Rental prices in these cities are expected to rise by 22 and 16 percent, respectively.
All of the best cities to invest in India listed above are ideal if you want to start or increase your rental income. If you are looking to buy or rent a property in one of the top cities mentioned above, Assetmonk has thousands of properties that are perfectly suited to your needs. Assetmonk is a WealthTech Platform that provides rental investment with an IRR of 14-21 percent in cities such as Bangalore, Chennai, and Hyderabad.
The Average Rental Income in Top Indian Metropolitan Cities FAQ’S:
Rental properties are an excellent source of cash flow. Another advantage of being a landlord is that positive cash flow can lead to a high return on investment (ROI) for rental properties. Capability to generate passive income. Having a rental property is one way to generate passive income – income that you do not have to work for.
According to data from a leading real estate platform, Mumbai has the most rental property supply in the country, followed by Delhi, Bengaluru, Gurugram, and Pune.
We have observed that properties priced below Rs 6,000/sqft have an average rental yield of more than 3% across cities. Property priced at Rs 6,000 per sq ft or more, on the other hand, had rental yields ranging from 2.4 percent to 3 percent.