Markets with Bertie: Does it really take 109 years of savings to buy a home in Mumbai?

Mint

17 hours ago

Bertie highly values his eclectic circle of friends. Unlike his finance brethren who seem to be always hanging with their own tribe, Bertie loves the company of his artist, teacher and athlete friends. For starters, they dress better. They are enthusiastic about new adventures and know of cool places to eat and drink that aren't called Bastian or Yauatcha. But what Bertie loves the most are the conversations that almost always provide a different perspective or teach our old dog Bertie a thing or two. The only small irritant is that this crew relies on Instagram to get their financial news and then uses Bertie as a human ChatGPT to ask questions or seek opinions on matters of money.
Three people from this cohort sent the same news piece to Bertie last week. It was about how it would take 109 years of savings for even the top 5% income-earning families in Maharashtra to afford an average-sized dwelling in Mumbai. Over time, Bertie has developed some standard responses to these Instagram forwards like 'It's Trump, man!' (with hands thrown up in the air emoji) or 'Stay invested for the long-term' (with a human in meditation pose emoji) or the most-used 'This sounds like a scam' (with a red cross emoji) but this 109 years of savings, Bertie thought, would deserve a deeper response.
Now Bertie loves to rant about Mumbai real estate as much as the next guy in the local train; not just about prices but the soul-sapping experience of buying a house in the city. But Bertie also takes pride in the fact that he rants with data. So, over the weekend, Bertie went through the math behind the sensational '109 years of savings' news item. To estimate the savings potential of a household, the data used consumption expenditure as a proxy and multiplied it by the national savings rate of 30%. Now Bertie knows enough economics to know that the savings rate is to be applied to the overall per capita GDP number and not the consumption expenditure.
The other issue, thought Bertie, was using the Maharashtra income levels to compare with real estate prices in Mumbai. Of all the states in the country, Maharashtra probably has the starkest difference between the per capita income of its capital city and the rest of the state. Various studies estimate that Mumbai's per capita GDP would be 3-4x that of Maharashtra.
The thing that made Bertie go wide-eyed, though, was the estimate for the cost of an average dwelling unit in Mumbai. It was assumed to be ₹ 3.5 crore: a 1,184-square-foot house costing almost ₹ 30,000 per square feet. Even a permanently outraged news anchor would think twice before basing his outrage on this estimate. Bertie looked up recent Government data that showed that the average value of property transactions in Mumbai in recent months was just over ₹ 1.5 crore, and that too after the recent surge in the luxury end of the market.
To be sure, not for a minute is Bertie arguing that Mumbai real estate is affordable, but 109 years is taking it a bit too far. Bertie is thinking whether he should send a long voice note to his friends explaining all this, or should he resort to his time-tested strategy of a one-liner. After some deliberation, Bertie did the predictable. He typed: 'It's the builder-neta nexus, man' (with the usual hands thrown up in the air emoji).
Bertie is a Mumbai-based fund manager whose compliance department wishes him to cough twice before speaking and then decide not to say it after all.