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Mumbai is ranked among the most expensive cities in India for accommodation rentals. The average annual rental cost for housing in Mumbai can put you back by ₹5.18 lakh for a 1 BHK apartment. This exceeds the average annual salary of junior level employees which is around ₹4.49 lakh, an annual report by CREDAI-MCHI, an apex body of real estate developers has said.
The report states that Mumbai’s soaring rental costs may lead to a ‘brain drain’ as professionals may be forced to seek financial stability in affordable cities.
In comparison, the average annual rental cost in Bengaluru and Delhi-NCR for a 1 BHK apartment is almost half – ₹2.32 lakh and ₹2.29 lakh respectively.
The average annual salary for employees in Bengaluru and Delhi is ₹5.27 lakh and ₹4.29 lakh respectively, the report said, adding that the negative disposable income impacts peoples’ ability to cover basic living expenses and other financial obligations in Mumbai.
Mid and senior level employees end up spending almost half their salary on rent in Mumbai
According to the report, mid-level employees, who usually take up a 2 BHK apartment on rent, earn an average salary of ₹15.07 lakh annually and end up spending ₹7.5 lakh per annum on average towards rent in Mumbai.
In Bengaluru, on the other hand, mid-level employees residing in a 2 BHK earning an annual salary of ₹16.45 lakh end up spending ₹3.90 lakh annually on rent. In Delhi-NCR, the average salary for a mid-level professional is ₹14.07 lakh and the average annual rent is ₹3.55 lakh, according to the report.
Mid- level employees in Mumbai face enormous financial strain as rents consume a significant portion of their salaries, leaving little for savings and essentials. They are forced to spend hours commuting to the workplace and that takes a toll on their work-life balance and productivity. The cost of living restricts their ability to buy or rent better houses, affecting their lifestyle, the annual report of CREDAI-MCHI states.
Senior level employees in Mumbai forced to migrate to affordable cities
According to the report, on an average an annual salary for senior level employees in Mumbai is ₹33.95 lakh. It is presumed that they reside in a 3 BHK apartment and spend on an average ₹14.05 lakh per annum on rent.
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In Bengaluru, senior level employees earn ₹35.35 lakh annually (on an average) and spend ₹6.25 lakh for taking up accommodation in a 3 BHK flat. In Delhi-NCR, a senior level employee, on an average, earns around ₹30.73 lakh per annum and ends up spending ₹5.78 lakh on rent for a 3 BHK apartment, the report adds.
The report notes that senior level employees are migrating to cities that offer affordable housing, seeking a better quality of life and higher disposable income. This trend, driven by Mumbai’s soaring 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 adds.
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Premium rates in Mumbai’s real estate market extremely high
According to the report, the premium collected in Mumbai is 25 times more than Delhi-NCR, 50 times more than Hyderabad, 47 times higher than Bengaluru and 9 times higher than Chennai and Pune for residential real estate projects.
“On an average, a developer in Mumbai pays ₹54,221 as approval cost in the form of premiums to develop 1 square meter. In Delhi NCR, the cost is only ₹2,166, in Chennai, Bengaluru and Hyderabad it is in the range of ₹1,071 to ₹5,466, the report adds.
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High approval costs have made housing unaffordable in Mumbai
According to the report, 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 into real estate and forced people to migrate to affordable cities, the report said.
The report highlights that as of December 2022, Mumbai has over 1,671 ongoing projects, including significant infrastructure projects such as the metro rail, Trans Harbor Sea Link, Coastal Road that 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, the report said.
Last week, Niranjan Hiranandani of Hiranandani Developers had gone on record on social media to say that homebuyers pay almost 50% of the amount towards taxes.
“If you buy a house from me, in Mumbai, 50% of the money goes to the government directly or indirectly. Whether it is GST, stamp duty, FSI rate. I cannot give you an affordable house, the ready reckoner rate is so high that I cannot sell below the ready reckoner rate,” he had said.
