Why Does Yield Matter?
Buying a ₹1 Crore house that generates ₹20,000 rent per month represents a Gross Rental Yield of 2.4% (₹2.4L / ₹100L). You must mathematically balance this terribly low yield against the hefty interest rates (8.5%) you pay your bank on your home loan to see if the property genuinely makes financial sense vs a fixed deposit.
Cash-on-Cash Return Strategy
- Positive Cash Flow: Ideal (but rare in India) is when your monthly rent actively covers your home loan EMI amount, plus taxes, and you still pocket cash.
- Negative Cash Flow: High home loan interest means that almost all residential purchases in India are deeply negatively-cash-flowing. The investor relies solely on Capital Appreciation (property price going up 2x over 10 years).