Chennai – will the lower salary tag finally come off?
Traditionally, Chennai has not been seen as the best paymaster when it comes to jobs in the metros (save for Kolkata). There always existed a salary differential (on the lower side) compared to Delhi or Mumbai. Cost of living was often cited as a factor and this usually meant housing and transportation expenses. But, over the years, whether or not people are aware of the narrowing of this differential, the cost of living has indeed gone up in the southern metropolis, especially due to the rapid rise in housing costs over the last two to three years. And proactive employers, who have not been blind to this fact, have upped the stakes in the war for talent by offering higher compensation or housing-related perks. But they are just a minority and a large number of people – both employers and job-seekers are somehow caught in a time-wrap with respect to their approach on this issue. To put things in perspective, a decent (defined as at least a 1000 square feet), new apartment in most areas inside the city would be not less than Rs. 36,00,000.
In terms of PPP (Purchasing Power Parity), this is the US equivalent of buying a home for $360,000. Current US mortgage rates being lower than those in India (for a person with a median credit score), this itself means that the household income has to be at least $90,000 to afford a $360,000 home, assuming 10% down-payment and US annual property taxes and insurance (in many cases, PMI – Private Mortgage Insurance will get added if a minimum of 20% down is not made). Cut to Chennai now.
With mortgage rates here being 50% more than current US rates on average and loan duration also being lesser than over there, affordability for a Rs. 36,00,000 home pushes minimum required salary levels of a household well beyond Rs. 10,00,000 per annum. With both husband and wife in middle-class homes having to necessarily work these days, their combined income has to exceed a million rupees a year in order to afford a 3.6 million rupees home (with at least 10% down) inside a city like Chennai, supposedly one of the “cheaper” metropolises. This clearly shows that either the housing prices have to come down or wages have to go up to meet some equilibrium levels. About the former, it is highly doubtful. About the latter, it is rather inevitable but can also happen only in some (sunrise) sectors of the economy. In other words, a new class divide will emerge separating the property owners in the city from those who are priced out of it. Not too different from other forms of social divisions that have existed historically except for the basis, right? And there are people who still believe in a fair and equitable world :-).
Onnum puriyala maame…
Thennavan, excellently written as usual. The calculations show most families can only dream of buying a house in the city these days.
Thennavan:
How did you arrive at the $360,000 number from 36,00,000 with $1 = 42 rupiah ?
I got a 3 bedroom 2200 sq.ft home for sale for
$360K if you are thinking of packing up and
moving back to sunny southwest US of A.
I will throw in Free Idly & dosa for 3 months included at the local South Indian food joint.
But, I am afraid the neighbours speak only
Navajo and american (I am mindful of Thad
who may object if I say ‘English’)
Also, what makes you think that prices will not come down? we are right now in a hugely inflated bubble caused by a combination of cheap liquidity and irrational optimism about the continuing growth of the Indian economy. There are many speedbreakers ahead and when the bubble bursts, it is not going to look pretty
The best way to get past this housing blues, is to take up a job in a “high rise area” say like bangalore and gurgaon/pune…and live in a cheap place there. Chennai is really not that good a paymaster…(actually depends on the kind of a job…). But actually, Housing options wise, Chennai is a cool place, as it offers housing from 1000 rs to a lakh a month. I can minimise my cost of living by taking a shanty room in triplicane(heart of city) or a place like madipakkam, which is still closer to the main city, and given that trains are there in Chennai, the cost of commutation is also less.
True the rates of buying a house have gone up in the city, but still Chennai has a long way to go to shake a leg with Gurgaon/Mumbai/Pune belt of spiralling real estate prices.
My thoughts :-)
Articles like this really shows what is happening in Chennai
http://www.atimes.com/atimes/South_Asia/IC08Df04.html
It also has started the B vs C controversy
One more thing, since the comparison has been done with gurgaon…The best thing about gurgaon is the real estate is affordable, with a 2BHK in a good high rise apartment costing on or around 20-25 lakhs..
However on the down side, the electricity is the costliest comparted with any metro or non metro, power cuts thru the year at an average of atleast 3 hours/day, no public transportation, no law and order in place…makes life really tough.
Its up to you guys to decide…I have lived in Chennai (my home town), delhi and gurgaon.
I think Chennai is still far better in comparison with gurgaon atleast and talking of delhi, you may never know when your property would get demolished, since general opinion is that 80% of delhi is built illegally.
I now live in bombay and the only thing i dont understand about this place is as to why the real estate is so costly…1 BHK in central mumbai goes starting 35Lakhs….but the brighter side of living in mumbai is this, 24 hour water supply, electricity is one of the cheapest on an all india level, 24 hours power supply (save, instances of heavy rain, flooding, etc.,), very good connectivity, a lively place (you will find that this place never sleeps for real).
Io Da, appadiye irundhuttu pogattum machchaan :-).
SN, I think to that the market is saying “dream on” :-).
Annoynomas, thanks but no thanks for the offer – I am happy where I am which is Chennai. I mentioned PPP, didn’t you notice (in relation to your asking how I arrived at the $360K number). Don’t tell me you couldn’t “figure” it out :-).
JM, I agree that everything follows a boom and bust cycle but aren’t most people just surfers (as we also “surf” the net) riding a wave and always trying to catch the next one? :-)
Kartik, you are right that Chennai’s prices have not yet gone thru the roof but give it a couple of more months and they will most certainly not fail us :-).
Dina, thanks for the link and yes, my post on B vs. C too attracted a huge number of comments. Anyway, what are these people arguing about? Does not C succeed B? :-)
Imagellan!, so you have been one helluva city-hopper. I am sure you must have ample city-“wise” advise for people to act on :-).
Salary Selai-ary varai pogaama iruntha “sari”.