[REFRESH] 6% Yield on Pre-Leased Property: What Every Serious Investor Must Know

"I want a pre-leased property at 6% yield." It is one of the most common briefs investors bring to us.

The problem is not the number. The problem is treating 6% as a rule. Two properties can both show 6% and be completely different investments.

The short answer

A 6% gross yield means the yearly rent equals 6% of the asking price. That is all it tells you. It does not tell you how secure the rent is, how long it will last, whether it will grow, or what you will actually earn after costs. A 6% yield can be a good deal with a strong tenant and a long lock-in, or a poor deal with a lease that ends next year. There is no single "right" yield for pre-leased property. Judge the lease and the tenant first, and use the yield to check the price.

Why 6% should not be your rule

• It is gross, not net. Most quoted yields ignore stamp duty, registration, and the costs you carry as owner. Your real return is lower.
• It is a snapshot. It shows today's rent on today's price. Escalation can lift it. A vacancy can take it to zero.
• It hides the tenant. A higher yield often means the market sees more risk in the lease. A lower yield often means a tenant the market trusts more.
• It ignores the rate cycle. Fact: India's 10-year government bond yield was around 7.2% in early October 2026, and the RBI raised the repo rate by 25 basis points to 5.50% on 7 October 2026. Opinion: when bond yields and interest rates go up, buyers usually ask for more yield, and that can put pressure on prices. A fixed 6% "rule" does not adjust for any of this.

The VRX lens: yield is not the thesis

At VRX Capital, yield is never the investment case on its own. We look at seven things together: tenant, lease, cash flow, asset, location, price and exit. Yield only joins two of them, price and rent.

We also work out every yield ourselves from the price and the rent in the lease, instead of repeating a percentage from a listing. If you have a deal in front of you and want a second pair of eyes on the numbers, Call / WhatsApp: +91 9315368515.

Illustrative example: one property, three different yields

Illustrative example. The numbers below are made up to show the arithmetic. They are not a real property or a market benchmark. Purchase costs vary by state, so check the actual rates for your deal.

A unit is offered at ₹8 crore with rent of ₹4,00,000 a month, or ₹48 lakh a year. The listing says 6%.

Before income tax, the "6% deal" is already closer to 5.3% on your money. Now add escalation. If the lease has 15% every three years, rent rises to ₹4.6 lakh a month in year 4 and about ₹5.29 lakh in year 7. On the original ₹8 crore price, that is 6.90% and then about 7.94%, but only if the tenant stays.

Two "6%" deals that are not the same

Illustrative example. Both properties below show 6% gross yield on price.

Deal A's 6% has a contract behind it. Deal B's 6% could stop in 18 months. Deal B should be priced to a higher yield, or not bought at all. The headline number cannot tell you that. Only the lease can.

Mistakes we often see

• Using 6% as a floor and rejecting a strong, long lease because it shows 5%.
• Buying a weak or short lease because it shows 7% or 8%.
• Comparing a gross property yield with a post-tax return from another product.
• Trusting a yield from a listing without seeing the rent in the lease deed.
• Ignoring purchase costs, the security deposit and who pays maintenance and property tax.

Checklist before you trust a 6% yield

• Rent confirmed from the lease deed and rent receipts, not from a listing
• Who signed the lease: the operating company, a subsidiary or a franchisee
• Lease term left and lock-in left, in months
• Escalation: how much, how often, and from which date
• Who pays maintenance, property tax and insurance
• Security deposit amount and how it moves to you at sale
• Yield recalculated on your all-in cost, not the asking price
• Your exit: who would buy this from you, and at what yield

FAQ

Is 6% a good rental yield for pre-leased commercial property?

It can be, but the number alone cannot tell you. A 6% yield with a long lock-in, a strong tenant and regular escalation is very different from 6% on a lease that ends soon. Judge the lease first, then use the yield to test the price.

How do I calculate the yield on a pre-leased property?

Gross yield is yearly rent divided by the price, times 100. For a truer picture, divide by your all-in cost, including stamp duty and registration, and subtract yearly costs you pay as owner.

Why do some pre-leased properties show 4% and others 8%?

Mainly because of the tenant and the lease. The market usually accepts a lower yield for a tenant it sees as less likely to leave, and asks for a higher yield where the lease looks riskier or shorter.

Does a higher yield mean a better investment?

No. A higher yield often signals higher risk: a weaker tenant, less lease left, or no lock-in. Check why the yield is high before you treat it as a bargain.

Is the rent from a pre-leased property guaranteed?

No. Rent depends on the tenant honouring the lease. A lock-in reduces the risk of an early exit during that period, but it does not remove it. Please verify lease terms with a qualified lawyer.

Talk to VRX Capital

If a property is being sold to you on its yield, ask what sits behind the number. We can go through the lease with you and show what the deal really pays on your money. Read how we work with investors, see current pre-leased listings, or get in touch.

Call / WhatsApp: +91 9315368515

Related reading: The escalation clause most investors skim · Lease lock-in periods explained · Who actually signed the lease? · LOI is not a lease

This article is general information, not legal, tax or investment advice. Yields and returns are not guaranteed. Please verify legal and tax points with a qualified professional before acting.