National average of rental housing yields a mere 3 percent; Indian residential rental yields higher than Beijing, Singapore and Hong Kong.
Hyderabad commands the maximum rental yields across the country at 3.7 percent, followed by Bengaluru (3.6 percent), Pune at 3.3 (percent) and the entire MMR (percent), according to a report.
Rental yield which is the annual rate of return an investor can earn from his capital invested in a property has long since stagnated to a national average of 3 percent but the rental yields in India are higher than in Beijing, Singapore and Hong Kong but lower than cities like Manila and Jakarta, the report by real estate services firm Anarock said.
The Indian rental yield average of 3% is lower than that of other Asian countries that are pegged at 3.5 - 4% and European countries at 4.5%-5%, it says.
The lower the property cost, the higher is the rental yield. Therefore, investing in affordable or mid-segment properties will yield better rental returns (depending on external factors like location, project type, developer‘s brand) Luxury and super-luxury homes have the lowest rental yields.
Despite the relatively low rental yields, residential property investors increasingly prefer to earn a steady rental income over selling the property (after appropriate appreciation). ANAROCK’s consumer survey found that more than 53% respondents looking to invest in real estate in 2019 preferred to earn a steady rental income while only 39% would sell the property.
The demand for rental properties is mainly driven by the salaried population. A large percentage of tenants in cities like Bengaluru, Hyderabad, Pune and Mumbai are from the salaried segment and belong to industries such as IT/ITeS, BFSI, Pharma and services, says Prashant Thakur, Director & Head – Research, ANAROCK Property Consultants.
In fact, the IT/ITeS and the BPO sectors - the key drivers for commercial space in cities such as Bengaluru, Hyderabad, Pune and Chennai - has caused a steady migration to these cities. Resultantly, demand for rental housing has been rising steadily.The proposed Model Tenancy Act, 2019 aims to simplify the complex dynamic of the tenant-landlord relationship. The first draft of the policy was released in October 2015 and aimed to promote rental housing through public-private partnerships. In September 2017, the housing ministry announced a new public-private partnership (PPP) policy to promote private investment in affordable housing, including rental housing.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.