This was first published as “When Donald Trump Came to Mumbai” in the Economic & Political Weekly (EPW), Vol.51, Issue No. 23, 4 June 2016. You can download the PDF of the original article here.
In an interview to Forbes India Magazine in September 2014, Donald Trump made a characteristically outrageous statement. “Your real estate is unbelievably cheap… Mumbai is a great city and yet it is not priced like other comparable cities. It is priced lower than cities that are less important. That gives investors a tremendous amount of growth potential” (Srivastava 2014). While not as controversial as his more recent slurs in his campaign for the U.S. presidency, Trump’s hyperbole nonetheless was big news in India, where Mumbai’s housing market is by far the most expensive in the country.
Since the liberalisation of the Indian national economy in the 1990s, Mumbai (then Bombay) had routinely made headlines for its pricy real estate, which is more often compared to more prosperous global cities like London or New York than to its peers in India such as Delhi, Chennai or Bangalore.
Trump’s value proposition perhaps made some sense from his perspective as a foreign investor, going by prevailing market exchange rates between the U.S. Dollar and Indian Rupee (around USD $1 = Rs 60-62). By most measures, the price of real estate in Manhattan in the same period was anywhere between $1,250-1,500 per square foot, whereas in prime areas in Mumbai in 2014 around Rs 40,000-50,000, or USD $650-$800.
This direct measure of course takes no account of the almost incommensurable differences in infrastructure and other aspects of both cities, or relative urban income levels and purchasing power parity (PPP) per unit of currency between the U.S. and India. In these terms, one business journalist estimated that the actual rate per square foot rate in Mumbai would be more in the range of USD $1,800-2,500 after adjusting for PPP – thus making Mumbai almost 50% more expensive for its average citizen than New York (Kaul 2014).
But beyond the calculations of economists and business journalists, Trump’s statement about how India’s most expensive city was “unbelievably cheap” begged a wider question about the political economy of urban real estate, indeed the very reason for his very first business visit to India in late 2014. What comprises the value of urban real estate?