The rise of urban poverty and how it will shape neighborhoods in India

I have an aunt & uncle who live in Chennai. After 20+ years in Singapore and the USA they are back. Always living modestly and within their means, they have 2 wonderful kids who are “well settled” – married, or engaged and doing well.  They came by last weekend to spend some time with us and the kids.

Wanting to give back they moved to India with the intention of setting up a “home away from home” for young girls from broken homes – about 50 or so kids whom they will completely pay for in terms of food, clothing, shelter and education.

Aunt’s the passionate one and this has been her life project and mission for the last few years. They already support an entire school in their village (where they grew up). Its completely free for all kids and they paid for the land, construction, and pay for the teachers annually. All kids study there for free. Uncle for most parts, pays the bills and is an amazingly supportive husband. Its his way of saying thanks to her for being by his side for the last 35 years.

They came by home to see if I could take them around. Bangalore’s weather is temperate and nice (like Silicon Valley) and unlike Chennai (think Dallas in Summer, 365 days of the year). They were considering opening the shelter here in Bangalore. We spoke to a few principals at local schools who each had over 20 young girls who desperately needed a safe place to stay.

They figured they’d need about 150 Sq Ft of space per kid (this is on the high end, but its worth it) so about 7500 Sq ft home, in a 10,000 sq ft of land space. They had planned on hiring help for the home – a maid, a cook and a security guard.

Here’s their project costs. All numbers are REAL.

1. Cost of acquiring land in the suburbs of Bangalore (about 20 miles away from the city, think Morgan Hill or Gilroy for the suburb to a San Jose city) – $240,000
2. Cost of registering land (Taxes, government fees) – $3400
3. Cost of bribing officials to ensure their land can be used as a shelter instead of home – $10,000
4. Cost of building the home (structure) $120,000 ($16/sq ft is on the low end but its doable)
5. Cost of running home with food, maids etc. $40,000  (per child, per year is $800)
6. Cost of paying for kids education annually ($500 per child) $25,000

Total Capex cost ~ $375K
Annual expense – $65,000

The same costs were compared with doing the same project at the village that currently houses their school. The total capital expense costs were $120K and their annual expenses were about $20K for 50 girls.

They had budgeted about $250K in an evergreen fund (so it has to pay for CapEX and ongoing costs), so Bangalore priced itself out.

Trouble is urban slum dwellers need this kind of support. The average poor person in the city lives on the same daily income as the rural one.

With rapid urbanization (close to 60% expected to be in urban cities by 2020) this is the inevitable landscape change that Indian cities will go through. They are too expensive for the poor and too expensive for the rich to support the poor.