The economics of life - part 2: food, clothing, housing

In Indian thought, we used to be taught to "LIVE WITHIN MEANS". And, it goes without saying that the earlier generation (our parents, grand parents, their parents, etc), have by and large lived by this adage that has stood the test of time. In contrast, our generation seems to have slightly drifted from this time tested way of life. With increasing number of Gen X entering the job market, the relative ease of finding jobs (as compared to earlier generations) and hence much easy cash flow in one's hands, increasing number of retailers trying to exploit the unhindered human desires for more and more by making goods & gadgets available almost at one's doorsteps, easy access to credit thru' credit cards and other forms of easy money thru' loans under the garb of fanciful names and forms, we seem to have a well laid out roadmap for a "LIFE BEYOND ONE'S MEANS". These developments are but a few of the many more that have been & will continue to take place, as India transitions from a conservative society to become a more globally integrated society. What do these developments entail in the life of an ordinary individual, who incidentally forms the major proportion of the National populace? What challenges does the individual have to encounter to achieve a balance between living within means & living beyond means? I must admit at the outset that much of the responsibility to achieve this balance lies with the individual & hence it is natural for a fair amount of subjectivity to creep into the discussion.

Let us take the most basic needs (please note, it is NEEDS) of any normal human being - food, clothing, and housing. The fundamental purpose in most of our lives (assuming, we consider ourselves normal human beings), is to be able to fulfill these fundamental needs. Today in India, the common man cannot dream of buying a simple appartment or a small plot of land to have roof over his head in his lifetime. A decent 2 BHK appartment (about 700 - 800 sq feet) in Mumbai suburbs costs not less than INR 50 - 60 lac. My uncle in Chennai was telling me that a decent 1200 - 1400 sq feet appartment in one of the well known residential localities in Chennai costs upward of INR 1.5 crore. How can a common man even dream of buying such an appartment? While this is one extreme, there are those of the upper class who own multiple homes and luxury appartments. We are living in very testing and turbulent times of modern India, indeed. By the day, the prices of decent appartments across most Metros is shooting up beyond the reach of ordinary individuals and families. While housing remains one of the most important basic needs (and a priority sector for the Government also) of any individual or family, it is increasingly becoming challenging to own a home within one's service life. What has this got to do with "living within means"?

The point is, whether rich or poor or the fabled and celebrated middle class, most of us would like to own at least one house in our lifetime. But, given such exhorbitant prices, how does one afford a house in one's lifetime? Also, the moment one buys a house by incurring huge liability in the form of home loan, one ends up paying EMI of approximately INR 1000 for a loan of INR 100,000 for the next 15 - 20 years. So, if an individual buys a home in Mumbai suburb for say INR 50,00,000 after making downpayment of INR 10,00,000 (as per latest RBI guidelines, the buyer has to pool in 20% of the cost of a house & the bank will fund the remaining 80%), he will incur an EMI of approximately INR 40,000 for the next 20 years. If an individual has to pay EMI of INR 40,000 every month, we can imagine how much salary one has to earn so that the liability can be serviced. Given the fact that most job opportunities exist in Metros or Tier 1 and 2 cities, it is natural that people migrate to these cities in search of jobs. This migration is the driver for all subsequent chain of events leading eventually to high cost of housing. To add to the woes of individuals desiring to own a house, there is no such thing called "AFFORDABLE HOUSING". In fact, even the Government is not talking about making housing affordable.

Just look at what the figures say. Almost 70% of India lives in villages, that is 70% of 1.2 billion = 840 million. For simplicity, let's say 50% of this figure is Gen Next = 420 million. If these 420 million start living in Metros and other cities where employment opportunities exist, it is not very difficult to see how severely abysmal our housing sector is. Add to the 420 million, another 50% of the remaining 360 million already living in urban India. That is 180 million, & the total now balloons to a mindboggling 600 million, belonging only to Gen Next. What the housing sector needs is a policy framework from the Government to regulate the sector. Unless there is regulation, there is no way spiralling prices of homes can be reined in and housing made affordable to the masses. Parallely, in my opinion, individuals and households should practice austerity by living within means so that they can save substantially to afford roof over their head. How much austerity should be followed is very subjective and it is for the individuals & households to determine.

Too much of anything is not good for anyone. It holds good for food also. You eat too much of anything, you pick up obesity, diabetes, & what not. Here again, balance is most important. Balance not just in what we eat and how much we eat, but also the discretion and maturity to say NO to the temptations of our minds and senses. When this becomes our "way of life" it will lead to a healthy and disciplined lifestyle. This is what is called as LIVING WITHIN MEANS. It does not in any way mean starving oneself, but, it is more of a heightened state of awareness in which one knows how much of what and when one has to expend to lead a life of fulfillment and the courage to say NO when one senses that the line is very close by.