Serviced-apartment projects on listing portals sometimes advertise guaranteed yields of 7 or 8 per cent for a decade. A guarantee is only as good as the operator and the contract behind it. Before paying a premium for a promised yield, read the agreement, check what happens if the operator defaults, and confirm the guarantee is registered in a proper contract rather than printed in a brochure.
Why two properties at the same price yield differently
Yield is set by rent, and rent is set by tenant demand, which follows a few predictable things:
- Size and tenant pool. Smaller houses and apartments rent faster and sit empty less. A 5 marla house has a much deeper tenant market than a 2 kanal one.
- Society maturity. Possession blocks with families already living there rent reliably. Developing blocks with scattered construction mean longer voids and weaker bargaining.
- Furnished versus unfurnished. Furnished units in DHA and Gulberg command a clear premium, mostly from corporate tenants and expatriates, but wear and tear run higher and refurnishing is a real recurring cost.
- Portion rentals. In older parts of Lahore, renting the upper and lower portions separately often produces more combined rent than letting the whole house, at the cost of more management.
- Commercial adjacency. Houses near commercial spines and main boulevards rent better because tenants pay for the commute they avoid.
This is why a single citywide yield number is almost useless for decisions. The yield lives at block level, and that is the level to research.
Net yield: what the gross number hides
Net yield subtracts the costs that come with owning and letting, and divides by what you actually spent to buy, including acquisition costs. The typical deductions:
- Vacancy. Assume at least one month a year with no rent, more in new possession areas or for larger houses. One empty month on a Rs 2 lakh rent is Rs 2 lakh gone.
- Agent commission. Finding a tenant usually costs half to one month's rent in commission, paid each time a new tenancy starts.
- Maintenance and repairs. Paint, plumbing, fixtures and the small breakages tenants report. Budget 0.5 to 1 per cent of the property's value a year; older houses need more.
- Punjab urban property tax. Rented properties are assessed at higher annual rental values than owner-occupied ones under the valuation tables, so the bill is larger than for the house you live in.
- Society maintenance dues. DHA and Bahria both bill periodic maintenance and development charges, and these rise over time.
- Insurance. Optional in Pakistan, and most landlords skip it, but it belongs in a complete calculation.
The denominator matters just as much. On a Rs 5 crore purchase, a filer buyer pays 1.25 per cent advance tax under Section 236K, 2 per cent stamp duty in urban Punjab, and the society's transfer fee on top. Call the all-in cost Rs 5.2 crore and your yield falls before you have collected a rupee of rent. Our property tax guide works through these acquisition costs in detail.
A worked net-yield example
The figures below are illustrative, with every assumption labelled, so you can swap in your own numbers:
- Purchase price: Rs 5 crore. All-in acquisition cost: Rs 5.2 crore (purchase plus roughly 4 per cent in taxes and transfer charges).
- Monthly rent: Rs 2 lakh. Annual gross rent: Rs 24 lakh.
- Gross yield on all-in cost: 4.6 per cent.
Annual costs:
| Cost | Amount | Assumption |
|---|
| One month vacancy | Rs 2,00,000 | One empty month per year |
| Agent commission | Rs 1,00,000 | Half a month's rent per new tenancy |
| Maintenance and repairs | Rs 3,00,000 | 0.6 per cent of property value |
| Punjab property tax | Rs 1,50,000 | Assumed; varies by area and assessment |
| Society maintenance dues | Rs 1,20,000 | Assumed; varies by society |
| Insurance | Rs 50,000 | Optional, assumed |
| Total costs | Rs 9,20,000 | |
Net annual rent: Rs 24 lakh minus Rs 9.2 lakh = Rs 14.8 lakh. Net yield on all-in cost: 2.85 per cent.
The example is deliberately sobering. A 4.6 per cent gross yield becomes under 3 per cent once real costs are counted, and income tax on the rent still sits below that line. None of this makes rental property a bad investment. It makes the gross number a bad decision tool.
The taxes on your rental income
Rental income is taxable in Pakistan under Section 15 of the Income Tax Ordinance as a separate block of income, and it must be declared in your annual return. This applies even if you live abroad and rent out a Lahore property.
What surprises many first-time landlords is the withholding mechanism. Under Section 155, certain tenants must deduct advance tax from the rent before paying you:
- Government bodies, companies, non-profit organisations, diplomatic missions, and named institutions including private schools, boutiques, beauty parlours, hospitals, clinics and maternity homes must always deduct.
- Individual tenants only become prescribed persons once they pay Rs 1.5 million or more in gross rent in a year, which is Rs 125,000 a month.
So a family renting your house for Rs 100,000 a month deducts nothing, and the full rent reaches you. You still declare it. A company renting the same house as a guest house deducts at source.
The 2026-27 withholding rates for individual landlords, from FBR's published rate card:
| Annual gross rent | Tax to deduct |
|---|
| Up to Rs 300,000 | Nil |
| Rs 300,001 to Rs 600,000 | 5 per cent of the amount above Rs 300,000 |
| Rs 600,001 to Rs 2,000,000 | Rs 15,000 plus 10 per cent of the amount above Rs 600,000 |
| Above Rs 2,000,000 | Rs 155,000 plus 25 per cent of the amount above Rs 2,000,000 |
Company landlords face a flat 15 per cent. These are advance taxes, adjustable against your final income tax liability when you file. Late and non-filers face higher treatment, so keeping filer status matters for landlords as much as for buyers and sellers.
One development to watch: in June 2026, Punjab imposed a 16 per cent sales tax on rented properties with effect from 1 July, reported by national media as covering rented non-residential buildings and immovable properties including smaller houses rented out by owners. Property dealers and residents objected strongly, and the practical application remains contested. Before finalising any yield calculation, check the current position with your tax adviser rather than assuming this levy does or does not touch your tenancy.
Yield versus appreciation: the Lahore tradeoff
Yield is only half the return. The other half is what the property is worth when you sell, and in Lahore the two often pull in opposite directions.
DHA Lahore offers the clearest example. Gross yields of 4 to 5 per cent look modest, yet the same phases have delivered the city's most reliable long-term appreciation, and corporate tenants mean fewer voids. Bahria Town flips the balance: higher yield ratios on lower entry prices, with appreciation that has been strong but more uneven across sectors. Gulberg apartments sit in the middle, with yields that reflect genuine tenant demand from working professionals near the city centre.
And then there are plots. A plot pays no rent at all. Its entire return is appreciation, which is why file rates and possession timelines dominate plot investing. Comparing a plot's appreciation against a house's rental yield is comparing two different games. Decide which one you are playing before you compare numbers.
If you are weighing areas against each other, our area price guides and the house valuation guide show how to build the denominator of the yield equation from real comparables instead of guesses.
A note for overseas investors
If you live abroad and rent out a Lahore property, the rental income is taxable in Pakistan and must be declared here regardless of where you live. Practically, remote landlords need someone trustworthy handling rent collection, maintenance and tenant issues, and the rent agreement should name that person clearly. The purchase-side mechanics, from NICOP filer-rate concessions to powers of attorney, are covered in our guide for overseas buyers.
Estimate your Lahore property value first
Every yield calculation stands or falls on the denominator. Guess the property's value wrong and the yield figure is fiction, and casual guesses in Lahore routinely miss by 10 to 20 per cent between blocks of the same society.
Check your property's estimated value with Shakir Estate's AI Property Value Estimator before running the numbers. Enter the society, phase, block, size and property details, and it returns an evidence-based range with the rate per marla behind it.
AI valuations are estimates based on available market information and property inputs. Actual sale value can vary according to exact location, condition, plot orientation, street width, development status, demand, documentation and negotiation. Treat the estimate as your starting point, then confirm against actual listings in your block before committing to a purchase.
Frequently asked questions
What is a good rental yield in Lahore?
For residential property, 4 to 6 per cent gross is the normal 2026 range, with apartments in central areas reaching 6 to 8 per cent. Anything quoted far above those bands deserves scrutiny: either the price is below market for a reason, or the rent figure is optimistic. Net yields typically sit 1.5 to 3 points below gross.
Do I pay tax on rental income in Pakistan?
Yes. Rental income is taxable under Section 15 and must be declared in your annual return. Advance tax is deducted at source under Section 155 only when your tenant is a prescribed person, which for ordinary family tenancies under Rs 125,000 a month is not the case. The deducted or declared amounts are adjustable against your final tax liability.
How should I account for vacancy in the calculation?
Budget at least one month a year with no rent. In new possession areas, for larger houses, or for furnished units between corporate tenancies, assume more. Vacancy is the single largest swing factor in net yield, and optimistic assumptions here are the most common way a deal looks better on paper than in the bank account.
Is a furnished rental a better investment?
Furnished units in DHA and Gulberg earn a genuine rent premium, often 20 to 40 per cent over comparable unfurnished units. They also cost more to set up, wear out faster, and can sit empty longer between tenants. Run the numbers with refurnishing costs included before deciding the premium is profit.
Should transfer costs be included in the yield calculation?
Yes. Your return is measured against the money you actually committed: purchase price plus advance tax, stamp duty, registration and the society's transfer fee. Leaving those out inflates the yield by roughly the percentage they add to the price.
Do plots give rental yield?
No. An empty plot earns nothing until it is sold or developed. If you need income from your capital, you need a built property or a commercial unit. Plot investing is an appreciation play, and it should be judged on that basis alone.
A realistic yield is a modest yield. Gross figures sell property; net figures decide whether the property was worth buying. Work the example with your own rent, your own costs and your own block's prices, and let the honest number make the decision.
Comparing Lahore investment options? Send Shakir Estate your budget, whether you want rental income or long-term appreciation, and your preferred areas on WhatsApp at +92 300 4630499. We will run the numbers with you against current listings, not brochure promises.