Want passive income? Ahmedabad leads with highest rental yield of 3.9%

Highest rental yields are not in traditional investment hubs like Bengaluru or Delhi but in Ahmedabad, Hyderabad, Kolkata, and Pune. These cities are becoming hotspots for investors.

Ahmedabad's residential real estate market has the highest rental yield in India, clocking in at 3.9% as per a report compiled by Magicbricks. There has been a noticeable increase across the Indian rental market, with the average gross rental yield reaching  3.62 per cent in 13 major cities.

 

"This impressive rental yield comes as a result of both strong demand and relatively affordable property prices compared to other major cities. The city’s rental market experienced a notable 7.9% increase in rents during the quarter, with average rents for a 2BHK apartment rising to Rs 21,100 in areas like Shela and Rs 23,200 in South Bopal," said Magicbricks in its report.   The average price of properties in Ahmedabad is Rs 5,927 per square foot. The average monthly rent in the city has increased by 16.9 per cent compared to last year, reaching Rs 19.35 per square foot.

 

 

Despite the rise in rents, Ahmedabad continues to be one of the most lucrative markets for rental investors, driven by high demand in prime localities like Satellite and Prahlad Nagar. These areas saw rents for a 3BHK soar to Rs 42,500 in Satellite and Rs 40,000 in Prahlad Nagar, reflecting the steady rise in rental income potential.

 

In terms of market dynamics, Ahmedabad’s rental market shows a solid growth trajectory, with demand up by 18.07%  year on year across various localities, while supply has decreased by 5.8% year on year.  

 

Even Chennai experienced a notable 21.3 percent increase in rental yields from quarter to quarter, while Delhi saw a more modest yet significant 8.8 percent rise.

 

Another emerging city is Hyderabad where the rental yield rose from 3.5% in Q2 2024 to 3.7% in Q3 2024. The city saw a 28.2 per cent increase in average monthly rents to Rs 25.17 per square foot, while property prices only rose by 6.2 per cent year on year to Rs 8,188 per square foot.  Kolkata has a rental yield of 3.7 percent. Property prices in the city increased steadily, with the average rent rising by 12.9 percent year-on-year to Rs 22.14 per square foot.

 

"For decades, homebuyers primarily sought properties for personal use or as a primary residence. However, today's dynamic real estate market is shifting that trend, with residential investments offering better returns. Encouraged by rising rental yields, we expect many buyers to explore multiple property investments, even leveraging loans to do so." said Prasun Kumar, Chief Marketing Officer of Magicbricks.

 

Cities like Hyderabad, Ahmedabad, Pune, and Kolkata are  also experiencing significant increases in rental rates, outpacing established hubs such as Bengaluru and Delhi. 

"Both Hyderabad and Kolkata stand out due to their influx of tenants, driven by burgeoning employment opportunities and cost-effective lifestyles.

 

For investors, the current market conditions present an opportune moment to capitalize on rental income and property appreciation. With demand remaining robust across major urban centers, these high-performing cities offer lucrative prospects for long-term gains," noted the report.

 

Magicbricks’ flagship report “Housing Affordability in Major Indian Cities” also revealed that the property price to Annual Household Income Ratio (P/I Ratio) in India has increased from 6.6 in 2020 to 7.5 in 2024 (higher than the globally accepted benchmarks of 5). Based on the P/I Ratio, the report observed that Chennai (5), Ahmedabad (5), and Kolkata (5) are among the most affordable cities for residential investments in 2024, while the Mumbai Metropolitan Region (14.3) and Delhi (10.1) emerged as the least affordable.

 

The report also revealed that the EMI-to-monthly income ratio in India has risen from 46% in 2020 to 61% in 2024, indicating a growing burden of EMIs on home buyers and reflecting affordability concerns nationwide, especially metros. The trend is more pronounced in MMR (116%), New Delhi (82%), Gurugram (61%) and Hyderabad (61%). In contrast, cities like Ahmedabad (41%), Chennai (41%) and Kolkata (47%) are relatively more affordable.