Return on investment via residential rent highest in Bengaluru, Kolkata
Bengaluru still commands one of the highest residential yields countrywide at 3.7% despite a slump in real estate market, a report said. Though it loses to Kolkata by 0.2%, but the garden city stands ahead of other major cities, including Mumbai (2.8%). Hyderabad (3.6%) and Ghaziabad (3.3%) are the next in line. Here are the details.
The MagicBrick's report said average capital value of the top four cities is around Rs. 5,500/sqft, while for Mumbai and Delhi, it's above Rs. 9,000/sqft, which brings down rental yield to roughly 2.8%. The national average across all residential assets comes around 3%, as a result. Additionally, rent for furnished properties is more than unfurnished, but investment made towards furnishing is disproportional to rental yield.
The data collected from 14 cities revealed that present situation isn't attractive for investment for rental income purpose because return on investment is more in FDs and mutual funds. The report concluded that disparity between supply and demand for properties is to be blamed for this. Like, in NCR, there's an oversupply of projects. So despite low capital values, it registers mid-level yield.
"Bengaluru is the only city that is truly demand-driven and the increasing expansion of the corporate sector only indicates that the trend of will gain momentum. For now, we're looking at Bengaluru's rental yield against international benchmark," said JC Sharma, VC and MD, Sobha Ltd.
Due to real estate's recessionary phase since past few years, realty prices were at a high, forcing people to postpone their purchase plans. RBI's stringent lending norms, hike in home loan interest and possible economic slowdown were other dampeners in investment plans. However, both loan interest rates and apartment prices are now coming down.
On the plus side, low yield means residential market in India is still affordable. Majority of the properties command Rs. 35,000/month as rent, followed by a Rs. 15,000-25,000/month rent range. Rental yield is rate of income return over the cost associated with an investment property.
