Mumbai Real Estate: High Rental Costs Drive Professionals to Affordable Cities
Mumbai, one of the most expensive cities in India for rentals, sees junior, mid, and senior level employees struggling to afford housing. This has led to a ‘brain drain’ as professionals seek better financial stability in cities like Bengaluru and Delhi.
Mumbai Real EstateRental CostsBrain DrainAffordable CitiesReal Estate DevelopersReal Estate PuneOct 18, 2024
The report highlights that Mumbai's soaring rental costs may lead to a ‘brain drain’ as professionals seek financial stability in more affordable cities such as Bengaluru and Delhi. In these cities, the average annual rental cost for a 1 BHK apartment is almost half, at ₹2.32 lakh and ₹2.29 lakh, respectively. The average annual salaries for employees in Bengaluru and Delhi are ₹5.27 lakh and ₹4.29 lakh, respectively. This negative disposable income severely impacts people's ability to cover basic living expenses and other financial obligations in Mumbai.
Mid-level employees, who typically rent 2 BHK apartments, earn an average salary of ₹15.07 lakh annually and end up spending ₹7.5 lakh per year on rent in Mumbai. In contrast, mid-level employees in Bengaluru earning an annual salary of ₹16.45 lakh spend only ₹3.90 lakh annually on rent. In Delhi-NCR, the average salary for mid-level professionals is ₹14.07 lakh, and the average annual rent is ₹3.55 lakh. Mid-level employees in Mumbai face significant financial strain, as rents consume a substantial portion of their salaries, leaving little for savings and essentials. They often have to spend hours commuting to work, which can negatively affect their work-life balance and productivity.
Senior level employees in Mumbai, who earn an average salary of ₹33.95 lakh, are presumed to reside in 3 BHK apartments and spend around ₹14.05 lakh annually on rent. In Bengaluru, senior level employees earn ₹35.35 lakh annually and spend ₹6.25 lakh on rent for a 3 BHK flat. In Delhi-NCR, a senior level employee earns about ₹30.73 lakh per annum and spends ₹5.78 lakh on rent for a 3 BHK apartment. The report notes that senior level employees are migrating to cities with more affordable housing, seeking a better quality of life and higher disposable income. This trend, driven by Mumbai's high rental costs, could lead to a ‘brain drain’ as professionals seek improved work-life balance. Businesses in Mumbai may struggle to attract and retain top talent, impacting their competitiveness and growth.
The report also highlights the premium rates in Mumbai’s real estate market, which are extremely high. On average, a developer in Mumbai pays ₹54,221 as an approval cost in the form of premiums to develop 1 square meter. In comparison, the cost in Delhi-NCR is only ₹2,166, and in Chennai, Bengaluru, and Hyderabad, it ranges from ₹1,071 to ₹5,466. High approval costs are putting a strain on the real estate sector and making affordable housing projects increasingly unviable for developers. This has made housing unaffordable, reduced investments in real estate, and forced people to migrate to more affordable cities.
As of December 2022, Mumbai had over 1,671 ongoing projects, including significant infrastructure projects such as the metro rail, Trans Harbor Sea Link, and Coastal Road, which may cost close to ₹25,56 lakh crore. If the city remains unaffordable, residents may move towards cities with better cost of living options, making some of these projects under-utilized.
Niranjan Hiranandani of Hiranandani Developers recently highlighted the financial burden on homebuyers in Mumbai. He stated that 50% of the amount paid for a house goes to the government in the form of taxes, such as GST, stamp duty, and FSI rate. Due to the high ready reckoner rate, developers cannot sell houses below this rate, making affordable housing even more challenging.
Frequently Asked Questions
What is the average annual rental cost for a 1 BHK apartment in Mumbai?
The average annual rental cost for a 1 BHK apartment in Mumbai is ₹5.18 lakh.
How does the average annual salary of junior level employees in Mumbai compare to their rental costs?
The average annual salary of junior level employees in Mumbai is ₹4.49 lakh, which is less than the average annual rental cost of ₹5.18 lakh for a 1 BHK apartment.
Which cities are considered more affordable for housing compared to Mumbai?
Bengaluru and Delhi are considered more affordable for housing compared to Mumbai, with average annual rental costs of ₹2.32 lakh and ₹2.29 lakh, respectively.
What is the average annual rental cost for a 3 BHK apartment in Mumbai for senior level employees?
The average annual rental cost for a 3 BHK apartment in Mumbai for senior level employees is ₹14.05 lakh.
What impact do high approval costs have on the real estate sector in Mumbai?
High approval costs in Mumbai put a strain on the real estate sector, making affordable housing projects unviable for developers and leading to reduced investments in real estate.
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