No Room At The Inn!

The population of London is thought to be hovering around the 7m mark, although obviously if all the Aussie contingent suddenly got bored of rain, cold and snow, this would take a drastic dip to 6.5m and Walkabout bars across the city would go out of business.

By comparison Chennai is thought to have a population of around 8.2m, but like London, this figure varies widely depending on how you define the city limits and even who you talk to.

According to Wikipedia, London has a greater metropolitan area of 659 sq mi whereas Chennai has an area of 459 sq mi, this is quite difficult to imagine, so using the power of Photoshop and Google Maps you can see visually how the two cities stack up against each other.

Comparison of London and Chennai

Update: So I got around to making this map and this just blurs the lines even more, because looking at this comparison map (and I took care to line up the scales) Chennai looks about 1/5th (sorry Tom!) the size of London…so what boundaries are they using for London to say it covers 659 square miles?!

So how is Chennai able to fit so many more people in to a space that is roughly 2/3rds the size of London?

Well, for one, unless you are in the upper echelons of the super wealthy (and I’m talking multi-millionaires in dollars and pounds) there is simply no way to afford a house on your own plot of land in Chennai. Ten years ago it might have been possible on the outskirts of the city, but not today unless you can afford to spend millions of pounds on a patch of land.

Where London is made up of low density terrace houses which are two or three stories, Chennai is made up of thousands of individual apartment blocks, 4 stories or more tall with two or more apartments per floor. This is the kind of place most of the middle classes live in in the city.

As fast as property developers can build these apartments, they are being snapped up by a desperate crowd, which is remarkable given that we’ve come off the back of the worst recession in living memory, mortgage rates are 9% and up and even getting a mortgage in the first place is hard enough thanks to the prudent nature of the banks here – something maybe the west would do well to remember next time!

Property prices here in Chennai go beyond the ridiculous, sail past the insane and end in the ether somewhere along with British ‘low’ budget airlines. If you compare property prices with the UK, then yes, it’s much cheaper, you can buy an apartment in Chennai for £100,000 which is cheaper than anywhere in London, however if we use my company for comparison you’ll understand how crazy it is.

The company I work for is your standard Indian outsourcing company, the stuff the Indian dream and western corporate downsizing is made of. We’re about 200 strong and considered a decent medium sized company. Since it’s IT we pay well above the average salary compared to other industries.

The average employee earns around Rs 300,000 per year (Rs = Rupees), which is about £4,230. And that’s before tax and deductions of course.

The small 2 bedroom apartment I’m living in at the moment cost Rs 6,000,000 (£84,700) when it was purchased brand new two years ago, in other words, it’s 20x the average salary of an IT worker. After two years, the property prices have gone up so much they reckon this place is now worth Rs 10,000,000 (£141,200)! Wow!

Now back to the population thing. I consider this apartment that I live in large enough for myself. If I was married it might just be big enough for two people. But incredibly there are entire families living in the other apartments; literally it’s Mum, Dad, the kids, granny and granddad. I have no idea how they manage it, there’s only two bedrooms! But you understand why they have no option when you see how stupid the property prices are here, the average person will find it very difficult to buy a place of their own – and we (that is England as a society) think we have problems with the younger generation getting on the property ladder!

Ah yes, now I remember what the point of this entry was. The family that lives opposite to me were renting the apartment from a landlord, because that’s the only thing they can afford to do. However, even the rental prices are prohibitively expensive in Chennai. The family opposite were paying around Rs 200,000 (£2,800) per year, which is 2/3rds of the average IT salary! So even to rent a small apartment it takes an entire family to live there and contribute to the rent costs.

Oh, and on top of this, where it’s custom to give a one month deposit in England for renting, in Chennai the deposit is a minimum of 10 months up front! How people actually manage to put a roof over their head I don’t know!

The family opposite have just moved out, and when I was talking to my friend they said it was because landlords here don’t like people staying in their place for too long, otherwise the tenants might start to think they own it and have more rights than they actually do. Since it’s so difficult to find reasonable cost housing here, moving is something people only choose to do as a last resort, and once you’ve found somewhere, unless you can afford to upgrade, there’s no way you want to move.

So the landlords will give the tenants one years notice because a) it takes the occupiers so long to find an alternative place and b) it’s seen as a reasonable amount of time to give some one. My friend said that even if the landlord tried to evict the tenants, they would have to deal with a lot of angry people who will take the occupiers side and the whole thing could get very messy.

Sorry, keep going off at tangents. The family opposite me, despite living there for just 1 year got their 1 year eviction notice 12 months ago, and the time just came for them to move out yesterday. According to my maid, they still haven’t been able to find anywhere to live after a year of looking (even during the recession when things should be slow!). Apparently the mother of the family got so desperate she asked my maid for the number of the person who owns my apartment to see if they would be willing to accept a higher price than what I am paying!

Yesterday morning the old family moved out – for no other reason than the landlord didn’t want them staying there too long – and by the evening a new family had moved in. That’s how much in demand residential space is. As far as I know, and according to the maid (she’s better than a secretary for the amount of gossip she gets!), the family moving out don’t have a place to call home now, staying at friends and relatives instead.

Although there is a big push from the Indian Government to try and build ‘affordable’ housing from what I can see and what the local papers are saying, it’s mostly been all words so far. Developers can earn huge mark-ups on grander projects than they can from affordable housing, so from a business point of view there is no logical reason or incentive to build cheap housing when they’ve got plenty of demand from people who are prepared to pay high prices and then cram every member of the family in to the apartment.

The scary part is that it’s just going to get worse and worse as the Indian economy grows at 8% year on year.

7 Comments No Room At The Inn!

  1. Tom

    We’re British: Finding the worst cases and complaining about them (after having queued for an inordinate amount of time and then filling in some forms) is in our blood. It’s part of our genetic heritage.

    And, Peter, just below [put map here]*, you typed “2/3rds”. This offends my sensibilities as both a mathematician and someone who can rite proper. It is the equivalent of typing “two thirdsrds,” which is unnecessary and confusing.

    More to do with the actual topic of the post: I think whether or not somebody pays over the odds is largely down to the person concerned. I generally pay less for most things than most other people I meet. This is not due to conspiracies or evil governments, but almost entirely down to things like stupidity, laziness and apathy (not necessarily at the same time, but some people amaze me by being able to juggle all three). I usually take a bit more time and effort over researching prices and working out what I can afford in any financial situation. A lot of people wander in off the street and do what they’re told. That’s fine if this suits them, but they’re hardly at liberty to moan about spending over the odds afterwards.

    *I think you forgot to put the map there.

    Reply
  2. admin

    Yes, thanks to everyone who told me I forgot the map! I’ve put it in now that I’ve had time to do it! Some of us work for a living you know!

    Tom, I’ve been trying to explain to my friends in India that what Britain likes to do, as a nation, is moan about how awful things are, it doesn’t matter if it’s about Britain or any other country, we’ll moan, because it’s what we do. Unfortunately many people don’t seem to understand our ‘moaning’ culture 🙁

    When it comes to housing, rent and real estate prices I think it would be very difficult to go bargain hunting when prices are broadly similar across the board. For consumables like electronics then yes, it’s always good to hunt around.

    If I just write 2/3 it looks a bit lonely without the ‘rds’ added on to the end, so in this case I’m happy to break the rules of English to satisfy my own OCD! 😀

    Reply
  3. Tom

    If you were obsessive-compulsive, you’d need it to be /correct/.

    British culture appears to involve large amounts of smoking at people and spitting on every square centimetre of available floor. But with those of us for whom counting our fingers and writing our own names is something other than a laughably taxing task, moaning is a very British pastime.

    It’s not just about shopping around; even when you’ve decided there are often things you can do to shave off lumps of cash here and there, and that does apply to housing as well. It does over here, at any rate. I can’t comment on India knowing, as I do, next to nothing about geography. Was never any good at colouring in.

    Reply
  4. Alistair

    Like the article Peter – I guess this is what happens when ~1.1 billion people are fighting over city centre living.

    I was completely shocked that I could buy a luxury villa with pool, garden, etc. on the Cote d’Azur for less than a shabby looking 3-bed apartment in the Boat Club area. Having said that a parking space in Monaco costs €200,000!

    Frightening to think where prices will be in 10 years when the population is higher than China’s!

    Reply
  5. Fay

    The scary part is that it’s just going to get worse and worse as India grows at 8% year on year. – I was confused here as I thought you meant the population, but you mean the economy. The population is growing by just less than 2%.

    Population growth is the most frightening challenge humanity faces. It is the big factor behind so many local and global problems. As one physics proffesor mentions in his YouTube lecture: http://www.youtube.com/watch?v=F-QA2rkpBSY&feature=channel The greatest shortcoming of the human race is our inability to understand the exponential function.

    On another note, the amount that Chennai’s landlords must be raking in is astonishing. From what I have heard, Chennai prices started rocketing when NRIs sent their parents huge amounts of money which they invested in property. Hence few local people are able to afford to buy and many must rent at such a huge expense. From the conversations I have in my office, I’d say that this one of the biggest sources of frustration for my collegues.

    Reply
  6. admin

    Good observation about the growth rates, I meant the economy growth but you are right I should have put the population growth. Even 2% of 1,100,000,000 is…22,000,000 – per year, 1/3rd of the UK population! Yikes!

    And this number will surely increase as the rural areas get better access to medical care and health and hygiene education increases.

    You can’t blame people for using the influx of foreign money for investing it in property, it’s a very sensible thing to do. It should fall the Government though to ensure that there is enough affordable housing because the private sector is not going to consider it.

    To change your image, go to Gravatar.com and upload your own 🙂

    Reply

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