Property in India Earns Low Rental Yields and Is Overvalued

Property in India in some of the country’s biggest cities may actually be more expensive than property in European and North American cities. An academic publication has stated that it is easier to buy a house in London or New York than it is in parts of Mumbai. Another disturbing fact illuminated by this real estate website is that, in Mumbai, an average median income family would have to save money for 30 years to be able to buy a flat that is 970 square feet in area.

property in india

Not Worth the Investment

An anomaly that stands out is that many properties have actually provided lower rental yields for owners than if money had been invested in relatively safe 10-year government bonds.

Thus money earned from Renting out such properties has not kept ahead of bond value movements in India suggesting that the price of many properties is stretched or, simply put, properties are overvalued. Cities such as Tokyo, London, New York, and Seoul provide far better rental yields than the largest Indian cities and hence a price correction in these cities is less likely than it is in Indian cities.

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Is a Correction Coming?

As revealed by this property website, the fact that rentals have not kept pace with yields across asset classes means that many properties in Indian cities are overvalued. Many analysts have stated that a correction may very well be in order in cities such as Mumbai and the NCR. Experts have stated that price appreciation in many Indian cities will gradually slow down and that the value of real estate may actually fall sharply in certain Indian cities.

Investing to Earn Rental Income

Among real estate sites in India, few sites have gone so far as to state that rental yields have not kept up with yields on 10-year bonds. This is a stark fact as it means that buyers who hope to buy a property in India with the intent that they would earn regular rental income on it would gain better income adjusted for inflation if they invested in safe government bonds. Such buyers may feel that any property they buy would be worth much more in a few years than it is today, yet according to this real estate website prices are unlikely to rise much higher and may actually drop significantly in certain regions of the country.


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