In short
Gross rental yield is the annual rent divided by the purchase price, shown as a percentage. Net rental yield subtracts the owner's yearly running costs from the rent and adds purchase costs such as stamp duty and fees to the price. Net yield is always lower, and it is the better number for comparing properties.
The formulas
Yields quoted in listings, including on CredXP, are normally gross yields based on the rent and price shared by the seller. Treat them as a starting point and work out the net yield for any property you are serious about.
- Gross rental yield = (monthly rent × 12) ÷ purchase price × 100
- Net rental yield = (annual rent − annual owner costs) ÷ (purchase price + acquisition costs) × 100
Worked example
The figures below are an illustration to show the method, not market data.
| Item | Amount |
|---|---|
| Purchase price | ₹1,00,00,000 |
| Monthly rent | ₹60,000 |
| Annual rent | ₹7,20,000 |
| Gross yield | 7.20% |
| Acquisition costs (stamp duty, registration, legal, brokerage), assumed | ₹8,00,000 |
| Annual owner costs (property tax, insurance, repairs), assumed | ₹40,000 |
| Net yield = (7,20,000 − 40,000) ÷ 1,08,00,000 | 6.30% |
Costs that reduce your real return
- Stamp duty and registration charges on the purchase (set by the state government; check current Haryana rates before you buy).
- Legal fees for title checks and documentation, and any brokerage.
- Property tax and any maintenance or common-area charges the lease leaves with the owner.
- Insurance and repairs that are the landlord's responsibility under the lease.
- An allowance for vacancy: months without rent if the tenant leaves and the unit must be re-let.
- Income tax on rental income, which depends on your own tax situation.
Taxes that affect the cash you receive
- TDS on rent: many business tenants deduct tax at source from rent under Section 194-I of the Income-tax Act, so the amount credited to you is lower than the agreed rent. The TDS can be claimed when you file your return.
- TDS on purchase: when buying property worth ₹50 lakh or more, the buyer generally deducts 1% TDS from the payment to the seller under Section 194-IA.
- GST: rent from commercial property is generally subject to GST, and whether you must register depends on your turnover. Ask a chartered accountant how this applies to you.
Yield is not the only number that matters
A high yield can signal higher risk: a short remaining lock-in, a weaker tenant, or rent above what the market would pay a new tenant. When comparing two properties, look at net yield together with remaining lock-in, tenant quality, escalation terms and location.
Frequently asked questions
What is a good rental yield for commercial property?
There is no single good number. Yields vary by location, tenant and lease terms, and a higher yield often comes with higher risk. Compare net yields on similar properties and weigh them against the strength of the lease.
Is the yield shown on a listing gross or net?
Listing yields are normally gross: annual rent divided by asking price, before costs and taxes. CredXP shows gross yields based on figures shared by the seller.
Does rent escalation change the yield?
Yes. Yield on your purchase price rises each time the rent escalates. The yield quoted at purchase is based on the current rent only.
Next steps
This guide is general information, not legal, tax or investment advice. Rules and rates change; confirm details with a qualified lawyer or chartered accountant before you act. Rental income and returns from property are not guaranteed.