Avg rental yield of housing units mere 3%: Report

Residential properties generate an average rental yield of 3 per cent, according to a report by realty portal Magicbricks.

"The average rental yield in residential real estate assets in India is 3 per cent, however in cities with cheaper real estate rates, like Kolkata the rental yield is higher at 3.9 per cent," Magicbricks said in a statement.

Magicbricks' report, Rental Yield in Residential Sector, takes a look at the yield to understand the kind of returns that can be expected in the current scenario. The report covers 14 major cities and considers multi-storey apartments, builder floors, independent houses and villas.

Builder floors has a rental yield of 3.1 per cent, while multi-storey apartments has 3 per cent yield. Large format and high capital value assets like villas and residential houses have lower yields of 2.4 per cent and 2.9 per cent, respectively.

Magicbricks analysis of rental trends across 14 cities showed considerable variation. In general, markets with cheaper real estate were found to have the higher yields. With 3.9 per cent return, Kolkata has the highest rental yield.

Furnished properties command higher rental and yield is disproportionate to investment made towards furnishings. At pan India level, the yield on furnished properties is 3.3 per cent. Semi and un-furnished have yield of 2.9 per cent and 2.7 per cent, respectively.

"Low rental yields point to the fact that residential investment purely on the basis of rental yield is not sustainable. Especially, considering the fact that national rental yield average at 3% is less than half of prevailing fixed deposit rate offered by the banks," the statement said.

Magicbricks is leading real estate portal with monthly traffic exceeding 12 million visits and with an active base of over 14 lakh+ property listings, it added.