If you went back in time, most ‘middle class’ people were spending a big fortune of their income on ‘essentials’. Imagine in the 1980s – a person earning Rs. 5000pm (almost a HUGE salary!) – could have been spending Rs. 2000 a month on household expenses. This was about 40% of the take home salary.
Cut to today. Monthly take home is say Rs. 200,000 – the household expenses are say Rs. 40,000 p.a. This is just 20% of the take home pay.
Clearly NON-DISCRETIONARY SPENDING has gone down…which puts more much more money into your own hands for deciding what to do. So you end up spending on a house, a car and of course lifestyle.
How much should a person spend on housing should be seen as a question which is considered ALONG with the total amount of money spent on a) office commute, b) school commute and c) social commute if you socialise a lot.
For example a person staying in Prabhadevi, kids studying in a school in Dadar and both husband and wife working in Parel / Worli area may find it justified to pay Rs. 2 lakhs PER MONTH as rent in that area.
However for a person whose wife is full time at home and kids study in a school in Nerul it may seem better to pay Rs. 60,000 rent for a similar house and take the trouble of travelling from Nerul to Parel for his work (he may end up paying Rs. 20k extra on travel), but the saving in rent is just too high to be ignored.
What percentage one spends is obviously a function of the location of the house, the amenities, age of the house, etc. – but one does hear of Rs. 70,00,000 ANNUAL RENT in South Mumbai. This compares UNFAVORABLY WITH housing with far superior facilities in Singapore and Dubai 🙂
Wah wah Mumbai….
Source:Subramoney.com