Second Property for Rent? The Harsh Reality of Yield, Vacancy, and Taxes in India.

• Indian residential properties typically offer low gross rental yields of 2-3%, often dropping to 1.5-2% net before tax, far below home loan interest rates.
• Vacancy is a significant risk; even a one-month annual vacancy can reduce effective yield by 15-20%, plus brokerage fees for new tenants.
• Rental income is fully taxable at your slab rate after a 30% deduction, potentially reducing a 2% net yield to 1.4% after tax for those in the 30% bracket.
• Capital appreciation is not guaranteed and is often uneven, making it an unreliable justification for low rental returns and unable to cover monthly expenses.
• A second property for rent only makes financial sense if largely debt-free, bought at a discount, in a stable market, and as part of a diversified portfolio.

Why It Matters: Don't confuse property ownership with guaranteed income; rental property is a business with hidden costs.