Please don’t compare New York’s cost of living with New Delhi or Mumbai

Meenal expressing herself in NYPHOTO: Meenal expressing herself in New York, November 2008.

Alright, I’m quite tipsy now. Can you repeat what you were saying. Oh yes, I remember now: the cost of living in New Delhi or Gurgaon is high and that makes sense. Something something New York something something. Your drink must be better than mine. Even in my current state of intoxication, hearing New York as justification or explanation for the cost of living in Delhi sounds like a stretch. Why?

Gross Metropolitan Product in 2008

  • New York: $1466 Billion
  • INDIA GDP in 2009: $1240 Billion*** 
  • Boston: $338 Billion
  • Mumbai (Bombay): $209 Billion
  • Phoenix, Arizona: $200 Billion
  • New Delhi:  $167 Billion

Source: PricewaterhouseCoopers list of world cities economies

*** Shockingly, New York’s metropolitan product is more than all of India’s GDP. There’s a 9 fold difference in wealth between New Delhi and New York. But 2008 is dated. New York and America have suffered an economic ‘situation’ since. New Delhi and India, on the other hand, are growing at 5-10% per year. Fair enough, let’s fast forward …

Projected Gross Metropolitan Product in 2020

  • New York: $1561 Billion (at roughly 2% a year)
  • Boston: $413 Billion (at roughly 2.4%)
  • New Delhi:  $229 Billion (at roughly 6% a year)

I’ll rely on your judgment to assess the reliability of long term projections. We could compare New Delhi on other facets like median household incomes, etc. but the GMP example should be enough to dampen some of the intoxication.

Ready to look at the cost of living now that we won’t use New York City as justification? Let’s compare housing and car expenses between Phoenix, Arizona with Gurgaon. Why Phoenix? Phoenix’s economy size is close enough to New Delhi and Mumbai. Gurgaon is the newest ‘suburb’ and business center of Delhi and is generally 20% cheaper than Delhi.


Housing

Buying real estate

  • Median single family house in Arizona – $234,700 (Rs.1,10,00,000)
  • Upper middle class apartments in Gurgaon of 3-4 bedrooms are priced between $210,000 (Rs.1,00,00,000) and $640,000 (Rs.3,00,00,000). These upper middle class apartments are very run down by U.S. standards so don’t expect luxury to mean the same thing in the 2 countries. I realize that most will vehemently disagree – citing anecdotal numbers from the last few years – but in my Microsoft Excel opinion, buying real estate in India is a really risky financial deal.

Renting real estate

  • 2 BR
    • Phoenix: $875
    • Gurgaon: $425-$750 (Rs.20,000 – Rs.35,000) per month
      • Princeton Tower DLF Phase 5 – 100% power backup, 24 hour water, No club house, 1 car park, 1153 sq. ft. (super area – includes your share of common area so lower by 20% to get apartment area). The complex and the apartment were very run down.
        Rent: $400/Rs.19,000 in 2009
      • Heritage near MGF Metropolitan mall – 80% power backup (meaning that fans, lights and computer will run on their equipment during power outages, but fridges, air conditioners, heaters, etc. will not run during the outage), 24 hour water, No club house, 1 open car park. The common areas were relatively beautiful with leafy walkways etc. The apartment was also decent enough. This was one of the first buildings constructed by Unitech Builders and is considered old by Gurgaon standards. It is very close to several malls. We almost took this.
        Rent:
        $530/Rs. 25,000 a month in 2009
  • 3 BR
    • Phoenix: $1100
    • Gurgaon: $851-$2100 (Rs.40,000 – Rs.1,00,000) per month
      • Heritage near MGF Metropolitan mall – 3 BR with 1840 sq. ft. super area. See 2 BR notes for more details on Heritage.
        Rent: $650/Rs.30,000 in 2009

Get a basic or luxury apartment?

‘Luxury’ in India means 24 hours of water and electricity most of times – not wild deer in the backyard of your million dollar home or a view of the ocean from your city loft. Expect things to leak and break at regular intervals. Noise from honking and air pollution are going to be the same inside your luxury complex’s walls as for anybody else in the city.

Also, luxury 1 or 2 bedroom apartments don’t exist in Delhi (I saw some in Mumbai). The quality of the apartment rises along with it’s size. Even basic 1 bedroom apartments are difficult to find and 2 bedroom apartments are usually very run down (similar in quality to projects in the U.S. but without the safety/drug issues of the projects). 3 bedroom apartments can be found in basic and luxury configurations. But a luxury building’s maintenance in India leaves a lot to be desired so you should have low expectations.


Car

Cars and gas cost significantly more as a matter of government policy as well as challenging infrastructure. Indian versions of worldwide models (like Honda Civic) don’t have the same safety features but have more of a luxury feel inside.

Honda Civic

  • U.S.: $15,800
  • Gurgaon: $26,000

Mercedes E Class

  • U.S.: $34,000
  • Gurgaon: $62,512

Gas/Petrol

  • U.S.: $0.73 per liter ($2.75 per gallon)
  • Gurgaon: $1.11 per liter ($4.2 per gallon or Rs.52 per liter)

Maintenance

Cars in America run between 150,000 – 200,000 miles. Cars in India run about 60,000 miles (1,00,000 kilometers) with more repairs and accidents. Economist.com ran a story on car ownership costs across some big cities. Delhi is pretty high up there.


The better the quality of life, the worse the financial deal

This post is looking at a middle class life in the U.S and the costs of replicating that in India. I’m also using ‘replicating’ very broadly here, since you only sort of get a functioning apartment and car. Everything else that constitutes quality of life – environment, access to recreation facilities (parks, etc.), healthcare, education, median household incomes, crime, quality of transportation, etc. – are beyond your control and either non-existent or substantially inferior in India. Yet, costs of buying real estate in India are much higher than cities in the U.S. of comparable economy size.

If you want a quality of life that’s higher than U.S. middle class, it’ll be exponentially more expensive in India than in the U.S. The wealthier you are, the worse the price/value equation looks in places like Delhi and Mumbai.

On the other side, an Indian middle class life will be much cheaper in absolute terms when compared with the U.S. Be prepared, however, for significant challenges at this level (electricity and water shortages, major infrastructure issues, low quality of housing, etc.). Small town life in India can be very cheap. Jobs, however, are scarce in smaller towns and you will not find a social circle like Mumbai/Delhi/Bangalore.

Related article on New York Times

New Arrivals Strain India’s Cities to Breaking Point

By LYDIA POLGREEN
Published: November 30, 2010
The remains of a deadly tenement collapse in East Delhi are an emblem of India’s failure to handle its urban explosion.

Comments

16 local comments so far.
  1. Nidhi,

    Sounds so familiar and true:) Well written! We moved back and will endorse every word of it

  2. Gurmail,

    “Everything else that constitutes quality of life – environment, access to recreation facilities (parks, etc.), healthcare, education, median household incomes, crime, quality of transportation, etc. – are beyond your control and either non-existent or substantially inferior in India.”. Even though the overall infrastructure is inferior in India vs. US at the moment, there are plenty of nice parks in Delhi. Go visit Lodhi Gardens one day. Healthcare is far better in Delhi than most US facilities (places like Apollo). Crime is far lower than NYC in Delhi. Delhi Metro is infinitely better than any US metro. 

    • Prashant,

      Gurmail – I’ll venture to guess that you’ve either not lived in an American city or are letting your nationalism get in the way of objective comparison. And talking about objectivity, American cities aren’t even the best (Australia, Canada and Europe do much better). I only know India and US well so am limited in my comparison. You can read more: http://en.wikipedia.org/wiki/World%27s_most_livable_cities
      (Delhi is way down by any measure).

      • Gurmail,

        I currently live in Washington DC and have lived in other places like San Francisco for about 20 years. I have also lived and visited Europe quite often. Hence your guess is incorrect. I agree with you that prices in India are far higher than the US for many items. I was simply pointing out that when you are comparing two nations’ GDP, PPP is the better measure. 

    • Prashant,

      After the first few replies, I refrained from replying to Gurmail finding most of his comments uninformed and not deserving further discussion. But I did happen to visit Lodhi Garden in Central Delhi. It is absolutely stunning and I thank Gurmail for recommending it. If only I could afford living anywhere close to it so it could be a part of my daily life. Even though I’m 1.5 hours away, I’ll try and visit again,soon and often. Thank you Gurmail.

  3. Gurmail,

    Your GDP numbers for India are way out of date and are using the nominal price in USD. The proper way of comparing is GDP by PPP which makes India’s GDP to be nearly 5000 billion USD. 

    • Prashant,

      Am confused about the point you are making here. PPP is a great measure, but also has it’s own problems (quality comparison, etc. are hard to do for a given basket of goods and changes for each lifestyle – poor, middle class, luxury, etc.). Since PPP relies on similar quality basket of goods to make sense – India is more expensive at the upper middle class level (and up) in all the key expenditure areas – real estate, transportation, fuel, etc. You can read our expenses in Delhi in our Montly Expenses post: http://www.delhiledger.com/r2i-cost-of-living-india-monthly-expenses-2010-2011/

  4. Pranav,

    Prashant, apologies if I missed it, but which community did you end up renting and why?

    • Prashant,

       Hi Pranav – For privacy reasons, we can’t share where we live. The reasons were favorable lease terms, proximity to Meenal’s work and overall niceness of the place.

  5. Nidhruv,

    One question – wouldn’t this be a different article if you were talking about Bombay say ? More skewed I mean…. ? I mean, Delhi would compare to DC more than NY – not that I am particularly clued in to what the cost of living is in DC, but from what GS was saying, its not that high…

    • The prices are out of whack across India (the most in Bombay) – if you compare U.S. cities whose economies are similar to Bombay, you’ll find they are substantially cheaper than Bombay. I was talking to someone in the real estate industry in India and he was saying the same thing – the sky high prices are going to remain until all the black money continues to find a home in real estate.

  6. nm,

    The title states comparing Delhi vs NY, yet the comparison is between Gurgaon and Boston?

    • Wow. I didn’t think my bait-and-switch would be caught so early. Found the comparison of Delhi with New York absurd so switched to something a bit more appropriate.

  7. Vikaas Saxena,

    Nice! Welcome back!

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