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Tata Building $7,800 Apartments in Mumbai
theodp writes "What do you do for an encore after you've shown the world it's possible to build a $2,000 car? Ratan Tata, head of India's giant Tata conglomerate, now plans to build, 30 miles outside of Mumbai, 1,200 tiny apartments that will sell for $7,800 to $13,400 each. Sure, they're small (floor plans), but keep in mind that you can pay a quarter of a million bucks for a 250-sq.-ft. studio in the East Village. Time reports that Tata has had to beef up security to handle the rush of buyers who want to plunk down their $200 deposits (yes, that's two hundred dollars!). Who would've thought you could make IKEA homes look pricey?" The Businessweek.com article says that the apartments are aimed at someone making $6,000 to $10,000 per year (Time says $5,000). In Mumbai, a call center operator with 10 to 20 years of experience barely qualifies at $6,400 annually. 70% of the country's 1.2 billion people live on 1/20 as much.
The median price of a house in Detroit is $7500. Floorplans vary, but they are larger than these apartments. Home prices are relative.
I'm sure people are happy to buy a nice place in Mumbai, so the market supports higher prices. No one wants to live in a corrupt one-party third-world conflict zone like Detroit.
Sorry to sound snooty, but that's my gut reaction to the "this is unsafe!" comments. Unsafe by American/European standards, probably. Unsafe compared to Indian options? Ha.
Some photos of life in Delhi (a bit less "European" than Mumbai), including the inside of a couple homes, here. (Disclosure: that's a link to my old travel blog.)
We should praise improvement, not demand perfection.
The funny thing is, it seems like there's not really a comparable alternative in some Western countries.
Tata is pitching their homes at about 1.5 times their target market's annual income. Relatively speaking, it looks like that would place these at about £35,000 in the UK. In comparison, the Ikea homes were placed at a minimum of three times the income of the target market, and more like 5 or 6 times in many cases.
Have you seen how they build the average home? A normal priced home in my area is around $300k and if you see how they build them I don't see how these cheap structures could be much worse and remain standing.
Do you have any idea of the markup they have(had) on those homes? Are you thinking of a prebubble-burst price?
How much is tied up in impact fees, taxes, other miscellaneous hardware, not to mention the land?
What's the square footage of these homes? A 4k square foot monster? 2k 3 bedroom with a huge kitchen?
People don't NEED* that much space. In poorer areas, that 2k square foot house would be a multifamily structure. India is still poorer.
So everything costs less - labor, materials, land, etc... And the resources required for a 'McMansion' - a cheaply constructed large house, can instead be used to build smaller homes much better.
These are likely to be cheap and small though - but still better than what the renters/buyers would otherwise have.
Like with the Tata car - you have to realize that even though the car isn't safe compared to other cars, the market for the most part consists of those that would otherwise be riding mopeds/motorcycles, which aren't safer than the car, especially when you consider the things they do with it - like the pictures where they have seven people on the same bike at the same time, or are carrying a huge load of ducks or firewood.
Risk management and resource usage wise, the Tata is a good choice.
*I will admit that it can be nice
I don't read AC A human right
Tata is NOT saving costs by compromising on materials. So how are they saving costs? They're going in for cheaper land that's farther out from the city, and they're paying below market price for it, because they're offering the landholders an amortized profit-sharing across many years. They're then organizing a large number of builders to create entire communities from scratch, including hospitals, schools, marketplaces, and a variety of amenities where there were none before. They're building entire townships, and not just some homes. This is obviously a very capital-intensive approach. Call it the Las Vegas strategy: buying land in the middle of nowhere at low cost, and then building an entire self-supporting community there.