Yield mechanics · 4 min read
The yield gap: residential vs Grade-A commercial
Residential rental yields of 2.5–3.5% cannot service Indian mortgage rates. Grade-A commercial yields of 7–10% can — but require a SPV structure to be accessible.
The yield-cost arithmetic of Indian residential investment is broken. Borrowing at 8.5–9% to earn 3% rental is value destruction before considering vacancy, maintenance and tax.
Where the math works
Grade-A offices, logistics parks and quality retail in Tier-1 micro-markets clear 7–10% net yields with long lease tenors and creditworthy tenants. Capital appreciation is a secondary outcome; cash flow is the primary thesis.
Why structure matters
A Grade-A office building does not come in a 25-lakh ticket. SPV structuring lets investors take pro-rata economic interest with documented governance, transfer mechanics, and reporting cadence — without rebuilding the wheel for every deal.
