Banka, 23, pays ₹50,000 as rent and says she landed a rather good deal soon after the Covid-19 second wave. “Similar apartments in the building are now charging ₹60,000 rent,” she said.
Like Banka (see chart), renting for most residents of Mumbai involves quite a bargain: location and size of the house, proximity to the workplace, ease of access to essentials and utilities and even the quality of building construction. It’s very difficult to fit all these factors in their budget, while a higher rent can also lower one’s capacity to spend at other places.
Take the case of Abhishek Srivastava (see picture), who moved to Mumbai about a year back with his wife and two children. To make room for the ₹40,000 rent he pays here, Srivastava has had to drastically reduce the family weekly outings. “We have cut down lifestyle expenses from 25-30% of our combined salary to about 5% after moving to Mumbai. The other expenses, such as children’s schooling, investments, etc., are critical,” said Shrivastava.
The pinch of high rent is felt more by those who have lived in metro cities other than Mumbai, as is the case with Shrivastava. He owns a 3-BHK in Noida (in the National Capital Region, or NCR), and it is almost three times the size of the apartment he is renting now in Chembur, a large suburb in central Mumbai. “My home loan EMI is less than the rent I’m paying here,” said Shrivastava, who works in the sales function in the Banking, Financial Services and Insurance (BFSI) industry.
Rent takes up about 25% of Srivastava and his wife’s combined salary, yet there isn’t anything in particular that he likes about their apartment–it’s small to their liking, the fittings are old and the construction is poor. “We focused mainly on a location closer to the office since our children are very young and one of us can reach home quickly in case of any emergencies.”
Will they shift again if there is an increase in their incomes? No. “Shifting also includes additional costs of brokerage equal to one month’s rent and the ‘packing and moving’ charges. We will continue to live here for sometime,” said Shrivastava.
The difference in rents in Mumbai and that in other metro cities is huge—anywhere upwards in the range of 40-100%. For example, a 2-BHK unfurnished apartment in an upscale residential area in Delhi can be rented for ₹30,000-40,000, whereas that in a similar locality in Mumbai will start at ₹50,000 and even go up to ₹1 lakh. Rents in NCR, including Gurgaon and Noida which are hubs for private sector jobs, are 15-30% cheaper, compared to Delhi. As per industry reports, there is also no tangible difference in the salaries offered in Mumbai versus other metros, such as Bangalore or Delhi, for similar job roles despite the higher cost of living there.
Shivank Sharma 32, knows this too well. Sharma (see chart) pays ₹70,000 for a 2-BHK plus study room flat in Andheri East and said a flat similar to this one will be 40% cheaper in Gurgaon. “When I moved from Gurgaon to Mumbai, my rent increased two times but income increased by only 9%,” said Sharma, who is the vice president of a direct-to-consumer company.
How much is too much?
As a general rule, financial planners suggest that rental expenses should not be more than 20-25% of one’s income. “I suggest a one-third formula towards expenses, savings and home loan EMI. When you are renting, the one-third part towards EMI cannot be replaced by rent as in that case you will never be able to build a corpus for down-payment to buy your own house. So, the 33% should be broken up to 20% for rent and the remaining saved for the down payment. Someone who doesn’t want to buy a house can increase the rent component to as much as 33-35%,” said Amol Joshi, founder, Plan Rupee Investment Services.
Most of the tenants who Mint spoke to think that the rent is high, despite it being within the 20% cap.
For some, the reason is that it doesn’t give them value for money, while others say that high rent has a ripple effect on the cost of other services that push up the overall cost of living in the city.
Sharma, for whom the rent makes up 15% of his and his wife Abhilasha Singh’s total income, says that higher cost of living in Mumbai is not just restricted to rent. He is paying more to maids and other service providers in Mumbai compared to Gurgaon where he lived earlier, and also for commute. “Higher rents affect their (workers) lifestyle too, so they charge more to make enough to sustain themselves. Besides, in trying to find affordable accommodation, we have compromised on the location as well. So whenever we want to travel to Bandra or other such localities that have better restaurants and cafes, we have to incur additional fuel costs,” said Sharma.
Pramod Dwivedi (see chart), who recently moved to Powai from Chandivali, shares a similar experience. “Where I live now, the cost of such services is higher because the assumption is that people living in this area have higher incomes. So upgrading in Mumbai doesn’t just come with higher rent,” he said. Dwivedi upgraded from a 535 sqft 1-BHK flat to his current 1,400 sq ft 2-bhk for more space and better amenities. “My apartment is open on three sides, which is hard to find in Mumbai, and has large french windows. The rent, along with other costs, have increased by 180%, compared to my previous house. The rent suits my budget currently but if it increases substantially next year, I may have to do a rethink on staying here,” Dwivedi, who heads sales in a boutique asset management firm (AMF), said.
Since incomes don’t rise in tandem with rent and other expenses, the quality of living may feel inferior for most migrants coming to Mumbai. Sharma said he does not see himself living in Mumbai for too long. “My expenses have increased and savings have taken a major hit in trying to maintain a certain standard of living I aspire for.”
Dwivedi said that after seven years, he has gotten used to the smaller spaces. But, he offers a word of caution to newcomers. “For anyone who is looking to move to Mumbai, I suggest they get a 80% salary hike lest they have to compromise on their lifestyle for the next three to four years,” he said.