Moving to India: Cost of Living

'How much will it cost me to live well in Mumbai or Delhi?' This was the question I posed to many of my friends in India prior to my move. Since the definition of 'living well' varies from person to person, the range of numbers I received was fairly wide. My dear old mother who lives in Jamshedpur was not of much help either as she's still living in the seventies as far as the price index is concerned. Just ask the local vegetable grocer who has to haggle with her to recover his cost price. If you are a native of India returning home after a while, you are going to face some sticker shock till you convert back into your home currency for reference. Here's a quick primer to help you with your budgeting:

1. Cost of Real Estate: This is likely to be the biggest cost factor in your cost of living in India. I will cite price points for the two cities I am familiar with-Mumbai and Delhi/Gurgaon.

Mumbai is one of the most over-priced cities in the world in terms of value for money. South Mumbai real estate costs about $500-$700 per sq ft in a high rise condo building and about $250-$300 per sq ft in crappy buildings that would qualify as a ghettos anywhere else. When you think ghetto quality, keep in mind that even the good quality condo buildings in South Mumbai are so bad that you would find dirty staircases, crumbling exteriors, leaky windows (rainwater floods in) and poor plumbing when you pay $500 per sq ft. Prices in upcoming areas like Parel and Bandra are about $250-$300 for new construction which is superior to anything you will find in South Mumbai. However, living in a Parel condo building is like living in an oasis in the middle of a giant smelly slum. Also, the streets in Bandra and Parel get flooded with knee deep water paralysing traffic in the area during the monsoons. It becomes a nightmare to enter or leave home. Bandra prices are somewhere between Parel and South Mumbai and the location is popular with yuppies due to its nightlife and shopping choices. However, it takes more than an hour to enter and exit Bandra due to horrendous traffic conditions on the main artery linking Bandra to the rest of Mumbai. The rental yield in Mumbai is about 5-6% and landlords here try to push up rents in tandem with rising prices. Mumbai landlords insist on a 12 month advance rent and a large security deposit unless the renter has a large well known corporation's name on the lease. As a rule of thumb, expect to pay Rs 100,000 per month for a 2 BR apartment (about 1000 sq ft) and Rs 150,000 per month for a 3 BR apartment. If you choose to buy instead on renting, expect your monthly loan repayment to be about 2 X your rent in Mumbai and about 3 X the rent in Delhi/Gurgaon. The cost of home loans in India is fairly high at the current rate of 10.5%. The rule of the thumb to calculate your monthly loan installment would be Rs 1000 ($22) for every Rs 100k ($2200) you borrow, on a 20 year loan. If you choose to finance a $500k house with a 10% deposit, expect to pay about Rs 200k ($4350) per month.

2. Cost of Domestic Staff: Domestic help is cheap. A full time maid in Mumbai who cooks and cleans costs about Rs 2500 ($55) a month and a good driver costs around Rs 5k-7k ($110-$155) a month. For Delhi, you can assume approximately 60% of Mumbai salaries, however, I may be slightly off the mark here.

3. Groceries: Cost about Rs 10k-Rs 12k ($200) a month for a couple.

4. Dining Out: The best restaurants in Mumbai and Delhi cost as much as mid-tier restaurants in NYC or a major metro in the developed world. Expect to pay about Rs 3,000 to Rs 4,000 ($65-$80) for dinner and drinks for a couple. Cocktails at the top clubs and bars cost about Rs 350-Rs 500 ($8-$10) whereas beer is cheaper at Rs 175-Rs 200 ($4) a pint.

5. Clothes: There are a host of local apparel brands that sell urbanwear to India's teeming population of young consumers at Walmart prices. The quality is average but the designs are superior to anthing you will find at Walmart. Most of the major foreign brands are here including Levi's, Lee, Nike and Adidas. For some reason, I haven't seen Gap or Banana Republic here. Diesel is enormously popular with the rich young set here but they seem to have been acquired on overseas trips as I haven't seen a local Diesel store here. You can also buy designer clothing by local fashion designers who are pretty good but they are not cheap. Expect to pay at least Hugo Boss prices for their offerings.

6. Electronics & Appliances: This is one sector which has experienced significant price deflation over the years as import barriers and duties have come down. While you can't expect Wal-Mart price style prices here, expect to pay about 30% more for foreign brands (mostly due to import duties) that what you would pay at Bestbuy. Do your homework to find out if the foreign brand being sold is assembled in India-the import duties are a lot less on imported product kits assembled here vs. those that are imported in finished condition.

7. Gas Prices: Petrol cost Rs 50 a liter ($4.92 a gallon). Think of disel cars as a serious option as the government subsidizes it heavily here.

8. Car Prices: There are many foreign brands in India now offering a decent line up of mid-range cars. I am not a car buff so I won't venture to offer much opinion here. For price reference, consider a Toyota Corolla, a popular car with senior executives here. It costs about Rs 1 mill ($22k). A Toyota Camry costs twice as much as the import duty on it is almost 3 times as much-it's assembled outside India whereas the Corolla is assembled here. Car loans with principal repayment are available at 9%-10.5% rates for upto six year tenures. I am not sure if lease finance is available for cars in India.

PS: For the pie chart above, I have assumed the monthly instalment cost on a Toyota Corolla on a three year loan.

9. Getting past the gringo premium: While you have been busy blowing your hard earned savings on vacations in Hawaii to get your annual quota of sex from your spouse, your frugal relatives here have been a lot smarter with their money. They buy gold periodically to appease their spouses. Indian households save on average 25%+ of their annual income. Those who invested in real estate and stocks here doubled and tripled their investments in the last three years. With income levels shooting up at 20-30% a year across most white collar jobs, it's a matter of time when the Indian professional catches up with the median salary in the west. Yet, locals still treat visitors from the west as super-wealthy VIPs who should pay twice as much for everything. All you have to do is go online at an airline site and see the difference between the 'Indian resident' and 'Non-resident' prices for the same flight! It's best you shop with a savvy local till you get a sense of the domestic price index. A dollar still goes a long way even in Mumbai-more on this in an upcoming post.

10. Cost of Vacations: There is a huge shortage of quality hotel rooms in India and prices have gone sky high. A rapid increase in tourism and disposable income with local Indians has caused average room rates to shoot up dramatically. Room rates at five star hotels in popular locations like Goa, Rajasthan and Kerela, Mumbai, Kolkata and Delhi cost as much as to Rs 12,500 ($275) to Rs 16,000 ($350) a night during the peak season (Oct 1 - Feb 28). Book early (at least six months in advance) to lock in rooms and lower rates for your winter vacation.

11. Communications: The mobile revolution has made phone calls cheap. Domestic calls cost Rs 1 (2.2c) per minute on average, international calls to the US and EU are about Rs 5 - Rs 7.50 (11c - 16 c). Monthly subscription for a post-paid mobile connection is about Rs 400 ($9.50) a month. Hi speed internet access from MTNL, the best provider in India costs about Rs 3k a month with 512 kbps bandwidth and 4 GB download. You can also get a wireless internet data card for your laptop to receive and send emails on the road. It costs Rs 1,500 ($33) a month for unlimited data download. However, its very slow with actual bandwidth of 40-50kbps.

12. Base Case Monthly Budget: I would say about Rs 200k ($4400) for a couple living in a 2 BR in Mumbai and about Rs 120k ($2,600) for Delhi/Gurgaon. This would afford you a comfortable home, car, maid and a driver with the option to dine out at the best local restarants 6-8 times a month. However, this does not include discretionary extras like vacations, fancy parties, designer jewelry or clothing or for that matter, the cost of stocking up your bar. To some, a Rs 200k per month budget for Mumbai may appear over-the-top given that the average white collar Mumbaikar probably makes 2-3 times that much in an entire year. I should clarify that my reccomendations are targeted at folks who expect to make $100k + salary packages here in India, which are becoming increasingly common at senior levels in the financial and corporate sector in India.

Disclaimer: I am single and don't have any idea what it costs to raise kids in India today. This budget is based on estimates drawn from my personal experience.

Hope this post is useful. Please feel free to comment on it if you have any queries.

Comments

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Cost of living in India doesn't matter a lot for American or European countries. In fact they will live a happy life over here in India.

Posted by: hire a website developer | May 23, 2011 at 11:49 AM

However, I hope it takes over an hour in and out of Bandra due to horrible traffic conditions on the main artery connecting the rest of Bandra Mumbai. The rental yield of Mumbai is around 5-6% and the owners here trying to push rents in line with price increases. Mumbai owners insist on a 12 months rent in advance and a substantial bond, unless the tenant has a company name well known large on the lease.

Posted by: real estate | June 23, 2011 at 11:12 AM