Not New York, Singapore or London—these Indian cities spend the most on rent globally

While New York, London, Zurich and Singapore are often cited as some of the 'most expensive' cities in the world in terms of cost of living, the picture is somewhat different when one exclusively looks at how costly it is to rent an apartment: surprisingly, although global hubs remain expensive, some Indian and Asian cities are far less affordable when it comes to rent.

According to a new report by German asset manager DWS, it's not New York, or London, or Singapore that have the least affordable rental properties in the world: it's Bangkok, Mumbai, and Mexico City.

In its analysis of 80 cities across the world, the German asset manager used median income and average rent to calculate affordability of rental properties i.e. the percentage of median income that goes into paying rent.

On average, the analysis found that households allocated 38% of their incomes for rent this year, a figure that exceeded the widely accepted 30% threshold.

Using this method, DWS found that Bangkok was by far the most expensive in terms of rent, with residents in the South East Asian city spending nearly four-fifths or 79% of their incomes on rent.

India's financial capital, Mumbai, was found to be the second most unaffordable city in terms of rent, with residents spending a whopping 66% of their paychecks on rent.

The third and perhaps most surprising entrant in the top three was Mexico City, which was also found to have an acute affordability crisis with residents spending over two-thirds of their incomes on rent.

Global hubs such as Hong Kong (61%), New York (53%) and London (52%) also featured among the 10 least affordable cities in the analysis, their relatively better positions in comparison to some Asian and Indian cities attributable to much higher incomes.

Indian cities becoming unaffordable?

Mumbai's position as second is somewhat surprising, but not completely unexpected: India's financial capital has long been notorious for having sky high real estate prices and, by extension, rents.

What is perhaps more interesting is the presence of other Indian cities in the list: four Indian urban centres, including Mumbai, feature among the 29 cities in the world where residents spend more than 40% of their income on rent.

India's Silicon Valley Bengaluru is the 19th most expensive city in the world in terms of rent, while Chennai follows on its heels. being the 20th most expensive.

Interestingly, even Kolkata, which generally considered to have a low cost of living, makes the most expensive cut, beating out the likes of global destinations such as San Francisco, Boston, Munich, Stockholm, and Frankfurt.

While four of the five Indian cities on the list fall in the bottom half of affordability, there's one which makes the 'most affordable' cut as well.

DWS found India's national capital, Delhi, to be the 20th most affordable city in the world in terms of rent, and the only Indian city with a "high affordability" rating.

But, one might ask, how are Indian cities less affordable than a San Francisco or a London, which have notoriously high costs of living? Well, the answer lies in the method.

The income gap

Because the analysis used median income and average rent to calculate affordability, several Indian cities made the 'unaffordable' cut.

Despite India's growing and mammoth economy, per capita income in the country continues to remain far below that of developed economies.

In simple terms, while rent in San Francisco or London can be very expensive in terms of absolute numbers, the higher median incomes in these cities offset this: to illustrate, a household earning $10,000 and spending $4,000 on rent annually is spending far more of their income on rent than a household earning $100,000 and spending $25,000 on rent.

That leads us to the next question. After paying rent, how much of income remains with households to be spent on other things?

A disposable income crisis

When it comes to disposable income (in this context, median income minus average rent), Indian cities fared dismally.

Chennai, Mumbai, and Kolkata were the fourth, fifth, and sixth lowest in the list respectively in terms of post-rent financial capacities, while Bengaluru was ninth.

On the other hand, cities such as Singapore and San Francisco, despite having much higher rents in absolute terms, were on top in terms of post-rent financial capacity, reflecting the very high median incomes of residents there.

Regional patterns

The analysis found that several US cities featured in the more affordable end of the spectrum, with Salt Lake City (20%), Austin (23%), Dallas (24%) and Atlanta (25%) being among the most affordable American cities.

Outside the US, Australian cities such as Brisbane and Melbourne, as well as European cities such as Leipzig, Lyon, Lille, Stuttgart, Budapest, and Zurich were also among the most affordable.

Generally speaking, the analysis found that North American and Australian cities generally performed well in terms of affordability, while European cities showed mixed results.

Mainland Asia, however, lagged behind, with below-average performance in terms of housing affordability.