In the United States, the wealthiest one percent owns 40% of the country’s wealth. While these numbers are veritably disproportionate, wealth disparity in India is staggering.
In India, the richest one percent own a whopping 73% of the country’s wealth, as reported by Business Today. Nowhere is this more apparent than in Mumbai, where densely populated slums, like Dharavi, are contrasted by extravagant real estate developments.
Mumbai, home to about 13 million people, holds almost $1 trillion in private wealth. And while multi-billionaires like Mukesh Ambani of Reliance Industries builds a private residence valued at $1 billion, the middle and working classes find it increasingly difficult to own or rent a home.
In 1947, the Bombay Rents, Hotel, and Lodging House Rates Control Act was passed. The bill would effectively place a ceiling on the price of rent following the economic vacuum precipitated by Britain’s concession of India.
The intention of rent control is, ultimately, benevolent, allowing people across a range of incomes to find housing easily. However, in the context of India, where there is a substantial population of wealthy citizens, controlling real estate value has only created demand for cost-effective housing among the affluent, pushing middle and working-class residents outside the city or into the slums.
For perspective on the issue, it’s important to explore incomes in relation to rent and property values. The median rental cost of a 1-bedroom apartment in Mumbai proper is around 30,000 rupees ($430) a month.
Meanwhile, according to payscale.com, the average salary in Mumbai is around 45,000 rupees or $640/month. Additionally, 99acres.com, a popular Indian rental site, reports that a 600 square foot home in Mumbai would cost around $265,000 to purchase, against a yearly average income of about $8,000. Excluded in these numbers are other basic needs like utilities, transportation, phone and internet services, and, of course, food.
So, when the average resident of Mumbai earns at a subsistence level and lives paycheck to paycheck, the reality of owning property or even staying in an apartment is almost inaccessible.
In addition, according to 99acres.com, a popular Indian property rental site, 95% of residential construction in Mumbai has been built for ownership, and only 5% for rent. These statistics, given that non-affluent residents struggle to afford property, suggests that the wealthy can maintain and even expand their lifestyles, buying property when and where they please.
Alternatively, those with a fraction of that capital are forced to move further from the city and their employment or reside in a slum. Moreover, Mumbai is a waterfront city, meaning pricy high-rise buildings are and will continue to be in abundance, while horizontal expansion will inevitably peter out.
It doesn’t take much to see that metropolitan areas in India, like Mumbai, are desperately in need of sustainable, affordable housing.
For any socially responsible entrepreneurs in urban development, India is poised for investment that goes beyond just the bottom line.