Is Mumbai Property Losing Its Investment Charm?
The average gross rental yield on properties in Mumbai is a mere 2 to 2.5 percent per annum, raising questions about the economic viability of real estate investments in the city.
Mumbai PropertyRental YieldsReal Estate InvestmentReitsInfrastructure DevelopmentReal Estate MumbaiJul 09, 2025
However, when viewed purely in terms of rental revenues, the argument for owning residential real estate in Mumbai is becoming increasingly weak. According to research from Knight Frank, the average gross rental yield on properties in Mumbai is a paltry 2 to 2.5 percent per annum as of 2025. This is one of the lowest yields among Indian metros, despite Mumbai boasting the highest residential property prices in the nation.
For instance, a typical 2BHK flat in Powai, costing Rs 2.5 crore, typically generates a monthly rent of Rs 45,000, or Rs 5.4 lakh annually, which works out to a yield of 2.16 percent. When adjusted for property tax, maintenance charges, brokerage, and void periods (when properties are unoccupied between tenancies), the yield drops below 1.8 percent—lower than inflation and much lower than returns provided by other asset classes.
On the other hand, Real Estate Investment Trusts (REITs) have become increasingly popular with investors over the past few years, offering dividend yields of 6 to 7 percent (Mindspace 5.83 percent and Brookfield 7.04 percent). REITs provide access to cash-generating commercial realty that is professionally managed and offers liquidity and transparency. They allow investors to enjoy monthly income and potential capital growth without the hassle of property management, tenant default risks, and regulatory issues. For investors seeking real estate exposure solely for returns, REITs offer a more efficient and diversified option compared to owning a residential unit in Mumbai.
Despite the yield disadvantage, many homeowners in Mumbai are reluctant to sell. The emotional value of property ownership often outweighs purely monetary considerations. This is especially true for inherited homes or those associated with significant life events such as marriage, childbirth, or career milestones. There is also a strong inclination to view residential property as a legacy asset to be passed down to children, or as a future residence for non-resident Indians considering a return. In many cases, this long-term emotional attachment outweighs short-term rental inefficiencies, particularly when the property is debt-free and held without the pressure of optimizing returns.
That said, Mumbai’s property market is not entirely stagnant. In recent years, certain micro-markets have seen a revival due to infrastructure development. ANAROCK data reveals that the Mumbai Metropolitan Region witnessed average residential prices increase by 7 to 9 percent in 2024, driven by significant infrastructure spends such as the Coastal Road, the expanding metro rail system, and the upcoming Navi Mumbai international airport. The redevelopment of older structures, particularly in the inner parts of Mumbai and sections of the western suburbs, is tapping into new demand, attracting both end-users and investors. This is infusing new hope into areas like Chembur, Sion, Mulund, and Bhandup—places that had long been neglected but are now benefiting from improved connectivity and urban planning.
For retirees or near-retirees, even a low 2 percent rental return can seem acceptable, especially if the property is paid off and serves as a secure, low-risk source of income. For them, the property is more than a source of monthly revenues; it acts as a buffer, immune to market fluctuations and with the potential for long-term capital growth. Real estate, after all, remains one of the most tangible and historically reliable instruments for creating wealth, especially in a city like Mumbai where land is limited and demand remains strong.
However, for younger investors or money-conscious homeowners, low rental yields coupled with elevated property taxes and weak liquidity are prompting a strategic reassessment. Many are opting to invest in newer residential projects in emerging areas or commercial spaces that promise higher returns. Some are venturing further out to fast-developing pockets such as Panvel, Kanjurmarg, and Thane, where property prices are more aligned with rental prospects and future growth potential. Others are moving away from physical assets entirely in favor of REITs and diversified financial products offering superior yields, transparency, and liquidity.
Ultimately, while Mumbai property still holds sentimental and historical significance, the data suggests that holding onto low-yielding residential property solely for passive rental income might not be economically viable. In a rapidly changing investment environment, where returns, liquidity, and asset performance are constantly under scrutiny, homeowners may do well to periodically review their portfolios. In the realm of financial planning, flexibility and pragmatic analysis are essential.
Frequently Asked Questions
What is the average gross rental yield on properties in Mumbai as of 2025?
The average gross rental yield on properties in Mumbai as of 2025 is 2 to 2.5 percent per annum.
What are the main disadvantages of owning residential property in Mumbai for rental income?
The main disadvantages include low rental yields, high property taxes, maintenance costs, and weak liquidity.
What are REITs, and why are they becoming popular with investors?
REITs, or Real Estate Investment Trusts, are professionally managed investments in commercial real estate that offer liquidity, transparency, and higher dividend yields compared to traditional residential properties.
Which areas in Mumbai are seeing a revival in property values?
Areas like Chembur, Sion, Mulund, and Bhandup are seeing a revival due to infrastructure development and improved connectivity.
What are some alternative investment options for those reconsidering Mumbai residential property?
Alternative investment options include newer residential projects in emerging areas, commercial spaces, REITs, and diversified financial products.
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