How Mumbai’s Airbnb culture and economics compare with 9 other global cities

This piece originally appeared on Livemint.com

 

Mumbai is yet to embrace the Airbnb culture and model—renting out homes, in part or full, to travelers—in the same way as other prominent global cities. But even in its limited expression in this aspect of the sharing economy, Mumbai is showing its real estate colours: high to middling tariffs that are tempered only by cheap and abundant labour.

Availability: It offers the fewest properties and prefers giving out rooms rather than entire houses

 

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Of the 10 cities studied here, Mumbai offers the fewest listings, and London, Paris and New York the most, though it can’t be established from the data when Airbnb first entered each of these cities. There’s also a difference in the type of property offered: Mumbai, more than any other city here, prefers renting out private rooms than entire houses.

Within Mumbai, clusters of listings can be seen in the suburban localities of Bandra West, Pali Hill, Andheri East and Powai.

Reviews: It is not scoring big on user reviews

User reviews are a driving force of the sharing economy, a key metric for a listing’s acceptance. Airbnb claims 72% of its guests review its listings and it only accounts for those properties here that have had at least one confirmed booking that month. Still, nearly half of Mumbai’s properties are yet to be user-reviewed, which is much higher than developed cities but in line with some other emerging cities.

 

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Tariffs: It is more expensive than Shanghai, Istanbul and Moscow

 

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It’s a reflection of Mumbai’s expensive real estate that the city ranks sixth among these 10 global cities in terms of its median rate for entire homes and private rooms, and seventh for shared rooms. In all three categories, it is more expensive than Shanghai, Istanbul and Moscow.

Overheads: Its real estate is costly, but its labour is cheap

When it comes to overheads, the pricy nature of Mumbai real estate comes to the fore again, figuring in the top five in charges for extra guests and the security deposit.

But on housekeeping charges, at $15 per day for an entire home and $8 for a private room, Mumbai’s housekeeping rate is the lowest among the 10 cities both in absolute and relative terms.

 

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Amenities: It is a middler in offering general and value-added services

This graphic maps cities on each amenity on a colour spectrum that goes from green (high value) to red (low value). Singapore offers the best bouquet. Mumbai, on the other hand, is a middler in some and below-average in others.

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News In Numbers – August 6

News In Numbers: August 6

 

$16 billion

An Australian Federal Court rejected environmental clearance to the $16-billion coal mining project by Gujarat-based Adani Group in the country for not having taken into consideration two endangered animal species. The Indian company has invested about $3 billion to acquire the port concerned (Abbot Point port), to buy land, and to secure approvals for the coal mine and connecting rail link. An Australian environment conservation group alleged that Australia’s Federal environment minister had not taken into account the company’s environmental history into account while approving the project. Back in 2013, the Indian government had fined a group company Rs 200 crore for causing damage to mangroves and creeks while developing a port project in Gujarat.

 

Rs 11,180 crore

The amount of private equity funds raised by India’s real estate sector in the first six months of 2015, thrice of what it raised a year ago. Of this, the residential sector received investments worth Rs 6,328 crore, with the commercial sector making up for the rest. Several major real estate companies are cash-strapped, given the current situation of low demand, high unsold inventory and falling property prices. According to a research report by Ambit Capital last month, prices of residential properties have fallen 7-18% across major Indian cities on a year-on-year basis. The country’s top listed real estate companies had unsold inventory worth Rs 70,000 crore in March.

 

2,060

The number of students who have dropped out of 16 Indian Institutes of Technology between 2012 and 2015. As many as 2,352 students have discontinued their studies from 30 National Institutes of Technology, human resources and development minister Smriti Irani told Lok Sabha on Wednesday. Dropouts have been the highest in 2014-15 and of this, IIT-Roorkee has recorded the maximum (about 30%). This institution had expelled 72 students last month for not meeting minimum passing grades; according to a news report, about 90% of them were from reserved categories and that lack of fluency in English was a major challenge for them. It took them back a few days ago. IIT-Bombay, which has been the most preferred among the IITs, saw 72 students drop out in these three years.

 

65.2%

Percentage of active workers on the muster rolls of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) whose bank accounts have been linked with their Aadhaar numbers. Yesterday, the Union Cabinet announced the direct transfer of work compensation to worker bank accounts, bypassing state and local government stops. This scheme, which assures 100 days of employment in a year to rural households, has been seeing flagging demand in the backdrop of payment delays and diversion of money.

 

Rs 3,786 crore

BSNL’s loss between April and September 2014, on revenues of Rs 14,125 crore. In 2013-14, the beleaguered state-run telecom company recorded a loss of Rs 7,020 crore. To reduce mounting losses, the Cabinet on Wednesday approved the hiving off BSNL’s tower business into a separate entity. Although the company has been attempting to generate revenues by sharing its assets for the last five years, it has a market share of less than 1%. This plan was mooted a few years ago and in 2012, the company had hoped to generate revenue of Rs 1,600 crore from its tower business in five years.

 

 

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News In Numbers – July 24

News In Numbers: July 24

 

Rs 70,000 crore

The cumulative unsold inventory of India’s major listed real estate firms as of March 2015, which is an increase of 23% from a year ago. This is nearly equal to the combined net sales of these companies in 2014-15. Between 2010-11 and 2014-15, house price inflation peaked at 28% during 2012-13, only to slide to below 4% in the third quarter of 2014-15. As real estate prices cool off across cities, people seem to be preferring financial assets such as mutual funds over physical ones such as gold and property.

 

90%

The share of algorithmic orders—orders determined, sometimes even generated, by a computer programme, as opposed to by human beings—in total orders on Indian stock exchanges. It is also the share of algorithmic orders in cancelled orders. In June, India’s central bank, taking note of such high numbers of automated orders, raised “concerns relating to systemic risks”. Yesterday, UK Sinha, head of the capital market regulator, said it was considering several measures to reduce risk in algorithmic trading. Such high-speed trading formed the backdrop to Flash Boys, the 2013 book by Michael Lewis that argued several Wall Street players were using it to game the market.

 

Rs 21,641 crore

Total revenue (excise plus sales tax) earned by the Tamil Nadu government from the sale of liquor in 2013-14. Recently, DMK chief M Karunanidhi promised to implement prohibition in the state if voted to power in the state elections in 2016, a complete U-turn on his party’s liquor policy. Some of the important schemes and subsidy programmes cost the Tamil Nadu government nearly Rs 27,000 crore, and a total prohibition is likely to hit the state’s finances, affecting these initiatives. The government expects over a fourth of its tax revenue in 2015-16 from TASMAC, a state-run chain of liquor shops.

 

$880 million

The amount that Indian pharma major Lupin is paying to acquire New Jersey-based GAVIS. At about Rs 5,600 crore, this is the largest acquisition by an Indian pharmaceutical company in the US. Lupin is paying over nine times the annual revenue of GAVIS. This is Lupin’s fifth foreign buy in less than 18 months. Four major pharma companies–Lupin , Cadila Healthcare, Torrent Pharmaceuticals and Aurobindo Pharma–have plans to raise a combined Rs 22,600 crore, mainly for acquisitions.

 

106

The number of vacancies for the post of independent directors on the boards of 32 public sector companies, including Coal India, ONGC and IOC. Since the BJP-led National Democratic Alliance came to power in May 2014, 106 independent directors have resigned or completed their terms. BHEL is the only PSU to appoint an independent director during this period. Last year, the market regulator had stipulated that boards of all listed companies should comprise at least 50% non-executive or independent directors, with at least one woman director.

 

 

 

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The common ground between Greater Noida, Gurgaon and Goa

This piece originally appeared on Livemint.com

 

Two of these districts, Greater Noida and Gurgaon, are concrete, practical outgrowths of the National Capital. The third, Goa, is a laidback corner by the western coast. What binds them here is real estate—more specifically, housing as an investment. According to Census 2011, these three are among the 37 urban areas (districts or other civic units) in India where the percentage of vacant houses exceeds 20%—roughly twice the national average in urban areas.

Most such houses have been purchased not with the objective of living in them, but from the standpoint of investment. Such is the volume of investor interest and the nature of Indian real estate that even supply gluts don’t have the effect of hammering down prices. It poses the larger question: as India urbanizes, how will it provide affordable housing to its teeming migrants?

Greater Noida, Gurgaon and Goa are housing-investment hubs

 

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According to Census 2011,more than 20% of houses were lying vacant in the urban part of 37 districts or other, smaller units of urban geography. In order to level the effect of a small sample size in identifying areas that draw above-normal

interest in real estate as an investment, we excluded areas—21 in all—where the number of vacant houses was less than 10,000. The 16 urban areas left with the highest rates of vacancy were led by Greater Noida, where more than half the houses lay empty. North Goa and South Goa were ranked four and six, respectively. In terms of number of vacant houses, Navi Mumbai Panvel Raigarh was the highest, followed by Gurgaon.

Empty houses don’t translate into lower prices

 

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Conventionally, vacant houses in an area should be an indicator of oversupply, and should lower prices there. But that’s not the case in the Indian real estate market, where people who want to invest in a house—as opposed to those who want to live in it—hold greater sway. Thus, it can lead to a peculiar situation like Greater Noida, which has delivered the highest price appreciation in the two-year period to June 2014 despite half its houses lying empty. Comparing price appreciation in 23 cities tracked by the National Housing (NHB) Bank Residex index with their respective vacancy rates shows there’s little correlation between the two variables.

Vacant houses exacerbate India’s housing shortage

 

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High levels of investor and speculator interest in real estate exacts an economic and social cost. It increases housing prices and elbows those who cannot afford it further to the periphery. In 2012, India’s housing shortage in urban India—comprising the homeless and people living in crumbling and congested houses—was estimated at 18.78 million houses. Around the same time, 11.09 million houses—60% of that housing shortage—lay built but unused in urban India, mostly because investors were playing the waiting game for a return.

 

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