Is Rs 70 lakh per annum the new middle class? Investment banker explains
A recent LinkedIn post by Gurugram-based investment banker Sarthak Ahuja has sparked debate by suggesting that an annual salary of Rs 70 lakh no longer guarantees financial comfort in India's metropolitan areas. Ahuja termed this income bracket as the "new middle class," highlighting how quickly high salaries are consumed by necessary expenses, leaving little room for savings or luxury.Ahuja's post suggests that out of a Rs 70 lakh gross salary, approximately Rs 20 lakh is deducted as taxes, resulting in a disposable income of around Rs 50 lakh. This equates to Rs 4.1 lakh per month, a figure that seems substantial but is swiftly reduced by unavoidable costs. He states, "This leaves you with just Rs 1 lakh for all other expenses," after accounting for major outgoings.advertisementThe investment banker breaks down these expenses further. A significant portion, Rs 1.7 lakh, is allocated to a home loan EMI on a Rs 2 crore loan for a Rs 3 crore flat. Additional costs include Rs 65,000 in EMIs for a Rs 20 lakh car financed over three years, as well as Rs 50,000 for international school fees and Rs 15,000 for domestic help.
Ahuja warns that these expenses leave a scant Rs 1 lakh for everything else, covering groceries, utilities, discretionary spending, and savings for an annual vacation. He dramatically notes, "By the end of the month there's nothing left!!!" This situation, he argues, typifies the financial squeeze faced by many high earners.He identifies three key reasons behind this financial pressure: rapid inflation, soaring real estate and car prices, and lifestyle pressures exacerbated by social media. Ahuja points out a stark reality, "In most cities, an average house costs 10–15 times the annual income of a household. In Mumbai, it is over 30 years!!"advertisementThe post concludes with practical advice for young professionals, urging caution with housing loans. Ahuja asserts, "The easiest low hanging effort you can make to solve this is to think twice before you sign up for a housing loan!" suggesting a more considered approach to managing these substantial financial commitments.
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