Overcoming Housing Challenges in India
India is one of the largest and fastest growing economies in the world. In five years, the country’s GDP is expected to increase by 8.3 percent1. Combine these factors with low labor and operating costs, an exploding population, and India’s young, well educated, and rapidly growing workforce, and it’s easy to see why the country offers growth opportunities for almost any company.
Like any emerging hub, India presents both opportunities and challenges to companies eager to expand within or establish operations in the country. Because of the soaring cost of living, salaries, and infrastructure bottlenecks in India’s capital cities (i.e. Mumbai, Delhi, and Bengaluru)2 expansion into the country’s regional cities (i.e. Jaipur, Lucknow, and Bhubaneswar) is evolving at a quick pace.
Companies relocating talent into India face several housing challenges, including high costs2, low housing availability2, and poor housing infrastructure2. Companies should be aware of these challenges and incorporate specific policy components and remuneration strategies to overcome these hurdles prior to initiating a relocation into the country.
Housing Among Top Challenges in India
Corporate housing represents one of the greatest challenges companies face in India. When exploring relocation options in the country, companies can expect to experience the following:
High costs: Obtaining a rental property in India is one of the most expensive and complex elements in an international assignment package.
Besides high rental costs, companies face a number of budgeting variables when renting housing in India. These variables include security deposits, stamp duties, registration fees, and broker/solicitor fees. If companies don’t adequately budget for these expenses early in the relocation process, they risk budget overruns once in country.
To put India’s high housing costs into perspective, consider the cost variance between renting an apartment in New York City and renting an apartment in Mumbai. The average cost for an unfurnished three-bedroom apartment in New York City is $90,000 per year3. A comparable apartment in Mumbai costs $107,000 per year4, before adding a security deposit, broker fees, and applicable stamp duties and registration fees.
Housing availability: There are no multiple listings available in India, and there are only a few housing agents that represent various properties in the country. Companies must contact these agents individually to obtain a complete listing of the rental properties available. Short-term housing is mostly unavailable in India, and lease periods run for a minimum of 11 months.
When budgeting, companies should factor in utility payments, including those for telephone, electricity, Internet, and cable television, as these items are not provided as part of a rental agreement. Tenants are responsible for purchasing (and refilling) gas in cylinders, but landlords typically cover water costs.
There are few furnished apartments available in India for the long term, and some furnishings might fall short of expatriate expectations. Unfurnished apartments are the norm, and these units generally do not have basic kitchen and household appliances, including air conditioning.
Housing infrastructure: Typically, companies rent houses in India as a “shell,” and the expatriate has to furnish it, not only with furniture and wall coverings, but also with kitchen appliances. Companies can negotiate these items when discussing the rental and lease arrangements with the landlord.
Because of the complexities involved in securing a lease for a rental property, many companies work with external consultants to assist in finding a rental home, sourcing furnishings, and negotiating a lease with the landlord.
Travel and transportation: In many cases, expatriates try to find housing relatively close to their work due to significant traffic congestions and road conditions, where a normal 30 minute car-ride in a western location can take one to two hours. It can be a challenge to resolve all their housing, schooling and general day-to-day living requirements relatively hassle-free.
Since companies rarely permit expatriates to drive in India, companies should factor transportation costs into the relocation budget, and companies should pay close attention to the distance between housing, the office, and schools (if children are involved in the relocation) when searching for a rental property.
Remuneration and Benefits
It is evident from The SIRVA India Mobility Report that companies typically provide various incentives to encourage expatriates to relocate into India. For long-term international assignments, companies often calculate remuneration based on home base salary, a relocation allowance (often 10 percent to 20 percent of base salary), cost of living allowance, remote/hardship allowance, and international assignment premium.
Specific benefits for a long-term international assignment might include orientation visits, cross-cultural transition programs, dual career support, private transportation, household goods transportation, housing and utilities allowance, education assistance, health insurance, home leave travel, rest and recreation, tax filing assistance, and repatriation programs.
Domestic assignments in a formalized approach are relatively new to India and predicted to increase predominantly in Non Tier 1 locations. Growth in business and lack of readily available talent in Non Tier 1 locations has driven the volume of domestic assignments. At a minimum, for long-term domestic assignments, companies should consider a remuneration package based on home base salary, a relocation allowance (a varied amount based on family size and position) and a remote/hardship allowance when relocating to difficult locations, for example to Tier 2 or Tier 3 cities.
Specific benefits for a long-term domestic assignment might include orientation visits, company car, household goods transportation, housing and utilities allowance, education assistance and health insurance.
Keys to Success
For a smooth and successful relocation, companies looking to relocate employees to or within India should thoroughly evaluate the location, have appropriate policies and practices in place, and anticipate the needs of their potential expatriates.
Companies need to understand the location infrastructure, the type of housing that is available, international schools, travel distance between potential housing and facilities.
Companies should also consider engaging an external consultant with an “expatriate/western living mindset” to conduct an orientation and home search for the expatriate. The consultant should possess solid negotiation skills to negotiate an effective deal for the expatriate and the company.
Consultants can also assist with the lease review and signing process, complete a thorough condition report, help expatriates move in, and ensure the appropriate housing furnishings are delivered on time and as ordered.
India presents both opportunities and challenges for companies, but knowing what to expect and how to prepare when relocating expatriates into the country can reduce the risk of a budget overrun and increase the likelihood of a successful relocation.
There is more information on housing and other relocation challenges in India in SIRVA’s India Mobility Report. SIRVA developed the report to address the lack of readily available benchmark data and trends on mobility policy and practices for international and domestic assignments in India. The report is available at www.sirva.com.
1. Global Forecasting Service, Economist Intelligence Unit
Article: India will grow faster than China in coming years, December 14th 2011
2. McKinsey Global Institute
Article: India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth
New York Housing Data (Dec 2011)
4. The SIRVA India Mobility Report, Vol.1, 2012.
Housing data provided by IOS Relocation, Mumbai (Dec 2011)
International HR Consulting Services Analyst
Manager, IHR Consulting Services
Asia Pacific Middle East
Source: SIRVA Relocation