Can rental yields surpass equity returns?

Rental income is increasingly being viewed as a reliable way for investors to secure steady growth and positive cash flow, according to analysts who say the returns remain far more predictable than those from equities. Experts note that global market uncertainties have made equity investments harder to depend on, while rental-led assets continue to offer consistent short-term and long-term gains. In a year marked by volatility across global stock markets, many investors are re-evaluating where real stability can be found.

According to the report, demand for student housing, co-living spaces and new hybrid models has surged in recent years, driven by rapid sector expansion and changing living preferences. The report says occupancy levels in these categories are now at record highs, adding to strong investor interest. Analysts believe this heightened demand is not temporary, as demographic shifts continue to reshape how people live and work across urban centres.

Keshav Mangla, GM – Business Development, Forteasia Realty, said, "Strong growth has made the potential of passive income from real estate more attractive than equities. There is positive, consistent demand for rentals in both residential and commercial real estate. Depending on the micro-market, yields are around 3-7% each year."

Mangla says these conditions have helped reinforce real estate’s position as a stable, income-generating asset that holds up well against inflation. He adds that investors are increasingly prioritising predictable income over speculative market moves, especially younger buyers who prefer long-term financial security. With more investors seeking secure, long-term options in a volatile market, the report suggests that this sector is emerging as one of the few that can meet that need with confidence.

The current market environment is focused on acquiring asset classes where capital can be secured, and stability is guaranteed, making it easier to choose real estate, and as assets are increasing in value, the ability to rent is yielding a continuous stream of returns. Industry experts say this shift has also been accelerated by improved regulatory oversight and maturing rental models, which reduce investor risk.

Anurag Goel, Director, Goel Ganga Development, said, "Unlike returns on equities, which are volatile and can lose value in various market cycles, cash flow from rentals is inelastic and guaranteed due to India's rapid urbanisation and the continuous housing demand."

In 2025, cash flow from rentals is guaranteed by rising rental affordability, enhanced property servicing, and the development of secondary rental markets. Also, real estate retains value as an inflation hedge, as rental income increases with the property over time. Long-term appreciation, as with property, is driving many to adjust the risk-return balance in their investment portfolios, with the focus shifting to real estate with continuing cash flow. For many households, the appeal also lies in the dual benefit of earning income while holding an asset that appreciates steadily.

Pramod Kumar Gupta, Director, Kadamashree Developers India LLP says, "The rental market in the last couple of years has been impacted by technology integration, legal alignment, and transparency."

Kumar said, technology such as digital tenant screening, automated collection of rent, and property maintenance has alleviated operational stress in the rental industry, and has improved confidence of investors. The rental market has been enhanced by government-sponsored programs that support rental housing and improvements of RERA. Experts say these changes have reduced disputes, increased accountability, and made rental transactions more professional than ever before.

"As of 2025, efficiencies attained in the rental housing market have been reflected in rental yields sustained by high occupancy and minimisation of default risk. The popularity of fractional ownership and REITs has simplified access to the rental market for retail investors. This has improved the reliability of real estate in comparison to the unpredictable returns of equities," said Kumar.

With more structured investment avenues now available, analysts say rental real estate is no longer seen only as a traditional asset but as a strategic tool for wealth-building in an uncertain economic climate. As equity markets continue to fluctuate, the debate over whether rental yields can surpass equity returns is gaining sharper focus among investors of all profiles.