On 27 October 2026, the State Bank of Pakistan raised its policy rate to 12%, up half a point from 11.5%, with September inflation at 10.3%. That decision reframes every rental yield figure in this article. A landlord is no longer comparing a 6% or 7% yield with a cheap mortgage. He is comparing it with a 12% policy rate and with what his money could earn elsewhere. Rent still matters, but it is no longer the whole return.
This comparison uses the most widely cited published city figures, drawn from asking rents and asking prices, not signed leases. Treat every figure as a guide, not a promise for any single flat.
What rental yield actually measures
Gross rental yield is simple: annual rent divided by purchase price, multiplied by 100. A Rs15 million apartment rented at Rs80,000 a month earns Rs960,000 a year, which is a gross yield of 6.4%.
Net yield is the figure that reaches your pocket. After maintenance, society charges, repairs, vacant months, management and tax, published analysis puts net yield roughly 1.5 to 2 percentage points below gross. A 6.5% gross figure therefore leaves around 4.5% to 5% net.
Two cautions. Furnished flats print higher yields, but costs and wear are also higher. And a city average hides a wide spread: two flats in one city can differ by three points or more by building, floor and street.
The four cities, side by side
Global Property Guide's Q3 2025 dataset for apartments, the most widely cited city comparison, puts Islamabad first at 7.01% gross, then Rawalpindi at 6.73%, Karachi at 6.50% and Lahore last at 5.87%. Average apartment prices in the same early 2026 reporting were about Rs27.0 million in Karachi, Rs25.5 million in Islamabad, Rs23.8 million in Lahore and just Rs12.1 million in Rawalpindi. Rawalpindi's low entry price is a large part of its story: a smaller denominator lifts the percentage even when the rent itself is modest.
Within the cities, the spread decides real deals. In Islamabad, furnished studios in Gulberg Greens were listed in 2026 at around 8.0% gross, while purpose built one bedroom flats printed 6.8% to 7.4%. In Karachi, two bedroom apartments in DHA were reported at around 4.7% gross, while Bahria Town Karachi villas were reported at 4.5% to 6%.
Why Islamabad leads and Lahore lags
Islamabad's lead is an apartment story. Its average house price was PKR 83.6 million in February 2026, the highest of the four cities, and houses yield only about 3% to 4% gross. Apartments are the opposite: a smaller ticket, a deep tenant pool of professionals and students, and rents that kept pace better than prices. Lahore is the reverse: prices in mature DHA and Bahria blocks are set by owner occupiers while rents are set by tenants, so it is a capital growth market first and an income market second. Rawalpindi is the value play with a catch: the lowest average apartment price gives it the second highest yield, but stock is older and resale liquidity thinner. Karachi sits in the middle on yield and first on depth, with the largest tenant market in the country. Gulshan-e-Iqbal two bedroom flats were listed in October 2026 from around Rs70 lakh to Rs1.9 crore, DHA standard two bedroom flats from Rs1.25 crore to Rs2 crore, and Clifton from Rs1.62 crore to Rs3.6 crore. In Karachi, yield is less about the city and more about the block.
The 12% problem every landlord must face
Here is the honest arithmetic. At a 12% policy rate, a 6.5% gross yield, or roughly 5% net, does not beat the risk free rate on income alone. It does not mean renting is pointless. It means the case now depends on total return: net rent plus price growth, minus costs, over the years you hold it.
Financing changes the maths completely: a buyer borrowing near the policy rate cannot expect rent to cover the mortgage early on, so the purchase must be justified by growth, a below market price, or a long hold. And price growth is no safe assumption: nominal prices rose only about 11% over five years while inflation averaged 15% a year.
How to test any listing in five minutes
Take the asking price and the achievable monthly rent, not the rent the seller hopes for. Ask two agents what the flat actually rents for, and use the lower figure. Multiply monthly rent by 12 and divide by the full purchase cost, including transfer and repair, for true gross yield. Then subtract a year of costs, charges, maintenance, one vacant month and tax, and divide again for net yield. Compare that with your alternatives and with growth you can reasonably expect in that block. Check title, dues and possession before you negotiate: a defective file can erase years of rent in one dispute. As a check, a Rs15 million flat at Rs80,000 a month prints 6.4% gross and roughly 4.5% to 5% net, so at 12% it only makes sense with growth or a below market price.
Frequently asked questions
Which city has the highest rental yield in Pakistan in 2026?
Islamabad at 7.01% gross, then Rawalpindi at 6.73%, Karachi at 6.50% and Lahore at 5.87%, on published apartment data. City averages, not guarantees.
What is a good rental yield in Pakistan?
For apartments, 6% to 7% gross is strong in 2026, and 4.5% to 5% net is realistic. Prime houses often yield only 3% to 4% gross.
Is gross yield or net yield the right number to use?
Net yield. Gross yield ignores maintenance, society charges, vacancies and tax, and runs roughly 1.5 to 2 points above net.
Does the State Bank rate rise to 12% change rental yields?
Not rents directly, but the comparison. At 12%, rent alone trails the policy rate, so a purchase also needs growth or a below market price.
Are furnished apartments better for yield?
They print higher gross yields, around 8% for Gulberg Greens furnished studios in 2026, but costs are higher too, so compare net yields.
Should I buy in Karachi, Lahore, Islamabad or Rawalpindi for rent?
Buy for the building, not the ranking. Islamabad suits apartment income, Rawalpindi lower tickets, Karachi depth of choice, Lahore growth over income. Verify title, dues and possession first.
The bottom line
Islamabad pays the highest apartment yield in Pakistan in 2026, Rawalpindi is close behind on a much lower ticket, Karachi offers the deepest choice, and Lahore rewards patience over monthly income. None of them pays 12%. After the rate rise, rent is only half the return, and the other half has to be earned by buying the right building at the right price, with clean papers.
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