My friends house was about 2 blocks away from Nariman house - the sight of the infamous siege on the Jewish community on 26/11. For a 600 sq ft 1 bedroom hall kitchen, my friend and his room mates were coughing up Rs 45,000 /- a month. My friend corrected me that the real rent is actually Rs 50,000 / month but he is getting a discount because of some renovation going on in the building. Judging by the fortune he paid for the apartment, you would imagine it to be an ocean facing villa with modern amenities like swimming pool, gym and manicured garderns. Horror behold! His apartment was actually in a very busy market area, in a dilapidated building which was probably more than 40 years old and might come down any minute. Once inside his compact apartment, I immediately started comparing this with my $700/ month (Rs 34,000 month), 800 sq ft 1 BHK in Houston in a very wealthy neighborhood. If Senior Bush could live a mile away from my apartment, I am sure my neighborhood must be really good! So even if I earn in rupees, it is much easier for me to afford a place in Houston than in Mumbai!!
Throughout my trip to India, real estate had been a hot topic of discussion for me. As my trip unfolded, I first got a taste of prices in Pune, then in Madras, then in Chembur (suburbs of Mumbai) and finally the shocker in South Mumbai. The prices kept going up in the same order too. Consider this analysis - Lets assume two individuals one in Indian and one in US, both with a post graduate degree and working in the IT industry. Someone who makes Rs 10 lakhs per annum in India can be compared to someone who makes about $80,000 a year in the US. In US for 4 times his annual salary ($320,000) he can afford a nice house in suburbs of most cities with a backyard and garage. But 4 times annual salary of the person in India (Rs 40 lakhs), wont even buy you a 1 BHK in most cities. This person would have to probably invest 8-9 times his annual salary to get a decent 2-3 BHK apartment.
With no significant property to my name in India, all of a sudden I felt like a really poor man in India. I cannot imagine how I can ever start from ground zero and establish myself in a city like Mumbai. On the same lines, I wonder how first time property buyers without significant savings can afford a property? For people who did not buy property 3-4 years ago, the prices now are so steep that they will invariably have to make a comprise on the area and neighborhood. Many say that a correction is already happening, but I haven't seen any signs of it in the market.
6 comments:
Dear Point,
I regret your experience with Real Estate in India and also congratulate you that you are not in India at this juncture.
The Real Estate prices in India are really unrealistic. A posh 1400 sqft villa in Texas is much cheaper then similar FLAT in Pune. Unfortunately, we in India live on Optimism and not on Reality.
Unfortunately our politicos support these Real Estate hype and they want the Real Estate prices to go up and up only. May god save this country.
Pointy,
I feel like how I cannot afford a place in Hyd (leave alone Bombay) with the money I earn in US. It is just freaking high.
Agree your point that a correction is in order but the thing I heard from somebody is land is something that doesn't grow. It is what it is esp. in India with our huge demands. So how much of a correction is it going to be is very questionable.
The only way out is development of 2-tier towns and cities in a big-big way with better connectivity to larger cities.
BTW belated Happy New Year.. Looks like you are in India..njoy!
yeah, we are four of us in a 450 sqft place (not 600) in Colaba. We've reduced our TV to a 14 inch so that the living room seems larger relatively :)
nicely written Arun.. definitely thought provoking, especially since I recently had an extensive discussion with a friend about returning to India for good.
The real estate disparity makes sense to some degree given that US has 2.5 times the land area, and one-third the population compared to India. What do u think?
What amazes me more is difference in prices of things like cars. Here, one can buy a decent sedan for 20-25k (say 1/4th to 1/3rd of annual salary according to your numbers), compared to 12-15 lakhs in India (which is more than annual saalary).
@Atul...I am not sure why politicians would like higher Real Estate prices..I have heard a correction is already underway..it probably will not take effect in the city, but atleast suburbs will get some relief
@Mani..Agreed..Mumbai is extreme..but other cities are terrible too..unfortunately infrastructure lags far behind this development
@Duh...I am still in denial abt the 4th guy...I think u guys should know better after reading 'White Tiger'.
@Hrishi..U r right abt cars..but remember in US, car is a necessity...in India it is a luxury..with the traffic and parking situation, you would rather rely on autos and taxis than own a car in India
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