The survey published in this week's economist is pretty interesting. According to it, Mumbai is among the least buy to let yield rates city. It means that if someone is buying a property only to lease it.. then its a money loosing proposition given the high inflation and interest rates scenario.
But what about the returns when a sells the property?
The real return of any real estate world over is from the capital gains. Even in this list if we analyze the topper Cairo, the rank has no meaning... Just a look at the prevalent interest rate there which is at 12.12% for 3 month loan (Reference: economist - published 28th Aug 2008) suggest that the return would be therefore negative ! True it will be more negative for Mumbai, but the comparison is still not accurate.
An accurate comparison should not just compare buy to let yeilds but should also adjust it for prevalent home loan rate and also the price appreciation. Mumbai which is doing badly on yeild & interest rate (thanks to Indian inflation) will quickly climb rankings on the capital gains! This will hold inspite of recent softening of property rates.