Published on March 4, 2014
On point 2.0 CITY Affordable Housing: Building mass housing in India On point AFFORDABLE HOMES A3 BUILDING MASS HOUSING IN INDIA A4 A4 A4 A4 A4 A1 Source community + analytics clytics community + analytics
Affordable Housing: Building mass housing in India On point 2.0 CITY AFFORDABLE HOUSING OPPORTUNITY CONTEXT 70 : 30 50 : 50 In the next four decades India will face a rapid urbanization. The proportion of urban population will increase from 31 % in 2011 to over 50% in 2051. 3 mn Housing is one of the primary necessities in a urbanizing country. Current deficit in the housing stock is 18 million units. Every year 3 million houses need to be constructed to meet the demand 30 bn $ Lower side estimate of the Low cost and Affordable housing market potential stands at 30 billion $ . 8,500 3 10 Source L ₨ L ₨ To meet demand we have to produce housing stock at 8500 units per day, about 10 times the scale at which some of the largest construction companies produce in a year. The Primary demand is at the base of the pyramid at a price point between 3 lakh and 10 lakh. clytics community + analytics
Affordable Housing: Building mass housing in India On point 2.0 CITY CONTENTS • The Affordable housing Opportunity – – – – • Mass manufacturing – – – – – • Shifting Operating model Streamlining project management: Setting workstation From a batch process To an assembly line Pioneering costs: Incumbent inertia Measuring the gap – – – Source Sizing the market Demand and supply Locating growth Supply side Handholding a nascent industry: Getting approvals Levers for the government Rebooting an industry clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India TURNING DEFECIT TO AN OPPORTUNITY SIZING THE MARKET Private market opportunity Annual 30 Bn US$ 1 2 1 18% 2 3 5 22% 25% 23% 12% SUBSIDY RENTAL 15 The mainstay market caters to the affluent . Comparatively low cost housing is close to twice in size in terms of value Conventional Industry Affordable Housing 10 The supply of affordable units it yet to measure up to the demand of Aspirers 5 5 Strivers comprise 22 % of the market and represent a business opportunity of 7 Bn $ annually 4 Low Cost Housing 2025 0 Impoverished 28% require both financial inclusion and access to a rental market 3 2012 Demand 4 Deprived households comprising 18% of the demand can not afford even the cheapest house of the formal market 20 25 30 Price Rs lakh Source Computed using data from IHDS, Clytics research clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India TURNING DEFECIT TO AN OPPORTUNITY DEMAND AND SUPPLY Uttar Pradesh A C West Bengal A C Kerala B C Bihar A C Maharashtra A B C Punjab A B C Karnataka B Delhi A C Jharkhand A C Haryana C Rajasthan A Andhra Pradesh B Jammu &… 17 9 A 26 12 38 8 — Orissa Gujarat Tamil nadu — 13 out of 20 larger states will have to initiate strong institutional intervention to contain the deficit — Uttar Pradesh and West Bengal alone shall account for more than 50% of the future deficit 14 9 14 15 18 x 20 x 4 Estimated Demand X 10,000 units Supply X 10,000 units 3 C 12 A 13 B Himachal… 1 1 Chhattisgarh Southern and western India will undergo rapid urbanization 20 7 7 North India will undergo a spell of rapid population increase — 12 5 42 11 17 2 44 14 8 2 Uttaranchal Madhya Pradesh 25 C 4 Population Increase Rapid Urbanization Undersupply 4 5 5 20 20 23 Source Census 2001, 2011, Demographic model Clytics Research 24 23 30 clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India TURNING DEFECIT TO AN OPPORTUNITY LOCATING GROWTH In between the last two censuses 2001 and 2011 total population in the seven metro grew by about 20% while that in the tier two cities has grown close to 40% in the same period. While the future remains discrete, a third of the Indian cities have come up within 50 km from a major metropolitan. Population Class Tier - I > 4 million The growth in future will take place within these agglomerations and on the routes linking them. Peri urban regions will become hotspots for the housing sector. Tier – II 1- 4 million Tier – III 100,000-1 million 2011 Source Census, Clytics research 2051 clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India TURNING DEFECIT TO AN OPPORTUNITY SUPPLY SIDE Overview Emerging Business Model Government of India has held low cost housing as a priority sector since independence. Initially, the five year plans were crafted to give financial assistance. Consequently state housing boards were set up to modulate the supply. From the late 70’s it became clear that the pace of addition of housing stock was not measuring up to the demand generated by population growth. Private sector participation in the low cost housing remained muted till 2005. Market driven Low Cost Housing is a fledgling industry; close to 100,000 families have moved into ‘affordable’ homes delivered over the last decade. 2 High offtake, construction is initiated after sales, Low working capital 3 1 Standardized product and business processes reducing turnaround times Low Cost Housing having an unmet demand 4 Affordable Land: Located in PeriUrban / Suburban region Low costs and faster occupancy, Low to midrise construction Most of the low cost housing projects are located in peri and sub–urban regions which are in between 60-100 km from the city center. Source Computed using data from IHDS, Clytics research clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India MASS MANUFACTURING SHIFTING OPERATING MODEL Past Recent Near Future Land and Marketing Quasi-Managed In-House Marketing Land Acquisition Design Significant Change in the Operating Structure to bring control and reduce costs by standardizing Project Management Project Execution Sales Operations and Maintenance Responsibility Developer PMC Since each project is unique most of the elements of operations were out sourced 3rd Party Source Computed using data from IHDS, Clytics research Low cost housing developers have stepped into the operations to reduce the costs In house PMC enables better coordination and control over delivery Some of the players have started integrating the design team Most of the design of will be carried in house to lower costs by standardizing Entities will experiment to bring core production elements under control clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India MASS MANUFACTURING STREAMLINING PROJECT MANAGEMENT:SETTING WORKSTATION 201 202 203 204 205 Reduce the batch size, the number of units executing a particular activity. Create workstations sequential work flow while optimizing the flow of materials and ensuring physical constraints are met. Kanban: use visual communication for benchmarks and control the flow of work materials and workmen Source clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India MASS MANUFACTURING FROM A BATCH PROCESS — — — The conventional construction is carried out in large batches. Entire floor of a wing (set of blocks) is casted together covering an area over 10,000 sft. The duration to complete activities at each stage (floor) consequently is stretched out to weeks. Identifying constraints in a large jobsite becomes challenging and as a parade of workmen of a related trade move in and then out, production delays get piled up. A3 A4 A4 A4 A4 A4 A1 Source clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India MASS MANUFACTURING TO AN ASSEMBLY LINE B2 B1 B5 A12 — The first step in adopting a leaner work process requires restructuring the work sequence to use A9 smaller elements. In case of housing these elements are a set of flats. A8 — Next the sequence has to overcome the physical constraint set by the curing of concrete. Instead of shifting vertically up after every casting the construction process has to move horizontally for few castings before making a jump to the next level. — A7 A6 Subsequently is possible to reduce the cycle time to a day. Source clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India MASS MANUFACTURING PIONEERING COSTS: INCUMBENT INERTIA Design Macro Level understanding RESISTANCE SOURCE OF Models of Partnership CONFLICT MITIGATION Application of technology Source Project Management Execution −Reluctance to collaborate for creating standards and protocols −Resistance to document design protocols −Opposition to standardization −Disinclination to move from managing with a span of weeks to a day −Conflict to accept standard process and change. −Refusal to log and share production and quality statistics −Failure to ensure prerequisites for the next activity is met. −Resistance to increase productivity and accepting ownership −Relinquishing control −Lack of time for fulfilling multiple projects. −Too much complexity in input parameters −Lack of time and expertise to manage change −Inability to understand and identify constraint −Common processes and benchmarks not evolved and developed −Lack of hands on knowledge −Fear of bringing out constraints in the open. −Process benchmarks are not available or recognized. −Frequent reallocation in between job locations −Lack of communication of a shared vision −Create cross functional teams working on specific standardization projects −Refrain from scaling operation till a maturity has set in −Have clarity in business plan before initiating design. Focus on a particular segment −Use a participative process to create benchmarks. −Hands on training −Allocate adequate buffer at the initial stages of the project to establish the process −Mix youth and experience while drawing the organization structure −Top management involvement in the change process on ground −Enable transparency visually communicate benchmarks −Peg the flow of information, drawings, resources material finance, workforce to the process −Communicate the larger goal clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India MEASURING UP HANDHOLDING A NASCENT INDUSTRY: GETTING APPROVALS Borewell Registration NOC from Labour Environment Tree cutting Registration with Labour Certificate of Electrical… DG Sets installation Electric substation Lift Escalator Fire fighting scheme Service Plan Site Office Approval structural Consent Commencement Certificate Other Common Infrastructure Layout Intimation of Disapproval Building Layout AAI Road Access Ancient Monument Development License NOC for CRZ (if near NOC from Forest NOC from Pollution Non Encumbrance Mutation Land use Conversion Ownership Certificate Source 1 2 3 Timelines 1 Uncertainty 3 Pre Construction Post Const. Occupancy 1 2 3 Publish Norms and divest compliance to Development Authority Extend deemed approvals in case of delays beyond stipulated time to fix accountability Increase project benchmark for MOEF intervention Construction Clearance 1 Building License 1 2 1 1 20-30 departments are involved in the approval process. In order to circumvent the process developers have been forced build on smaller parcels sacrificing economies of scale clytics community + analytics
Affordable Housing: Building mass housing in India On point 2.0 CITY MEASURING UP LEVERS FOR THE GOVERNMENT — Macro Level understanding Address approval delays — — Institute a 60 day approval window for affordable housing project. In case of indecision beyond the stipulated time projects will be deemed as approved. Create a single window for approval. Transfer the responsibility of compliance to development authority while the norms are set by multimodal organizations: AAI, ASI etc which are incorporated into the master plan. Create a repository for archival of approvals to create transparency both for the developer and the consumer. Address idle inventory Make redevelopment of the core city regions feasible by increasing FSI up to 15 in certain parcels. 80% of the 225 cities which will have over a million residents by 2051 are yet to make a master plan or have initiated urban planning recently. While it is difficult to make significant changes in existing tier I cities, adopting a spatially determined FSI policy will be easier in tier II and tier III if it is backed by a central policy. — Rationalize FSI Models of Partnership — — Marginal reduction in the vacancy status brought by tax adjustments can lead to significant mitigation in the housing deficit Introduce a mutation fee on land lying vacant for more than five years or every time the master plan of a city is redrawn to curb land hoarding. — Application of technology — Uniform by laws — Making a case for certification — Taxation — Source Overarching uniform templates to act as a guide for the project within a zone allowing developers to standardize their offerings based on market requirements within a region. Evaluate impact of housing standards imposed on the unit cost. For example reducing the requirements of a car parking 1 for every 2 units in Bangalore to 1 for every 35 units as in Hong Kong will enable developers to create smaller units for the same land parcel size. Extend tax rebate on capital invested for all affordable housing projects providing incentive to developers to transit towards industrial construction platform Provide relief on stamp duty, land use conversion and other taxes levied by urban bodies for affordable housing project. clytics community + analytics
Affordable Housing: Building mass housing in India On point 2.0 CITY MEASURING UP REBOOTING AN INDUSTRY — Macro Level understanding Set up an affordable subsidiary — — Climb down the ladder to deliver to a pent up demand. Existing brand catering to the affluent segment can be isolated by creating a subsidiary to cater to the affordable sector, with a separate organization set up and business model. Step out from the metro into the Tier II and Tier III. Market growth will remain robust, and competition is absent at present. Smaller format sell faster giving faster turn around and higher return on equity. — Reduce the number of parameters involved in design and execution. Create standard design configuration for unit layouts and use them across multiple projects. — Standardize design Models of Partnership Streamline project management: Period cost adds up to 20-30 % of the bill. Cutting off project duration by half can cut down 100-200 Rs per sft in large projects. Cycle workforce with same type of work and through the same location to allow the workers to get specialized Quick turnover Application of technology Source — clytics community + analytics
On point 2.0 CITY Affordable Housing: Building mass housing in India On point This a summary of the key findings drawn from our reports. You can access the complete report available publicly from this link or send a mail to email@example.com The first section of the report analyzes the interaction of the forces of demand and supply across the country. Subsequently we evaluate the basis of a new operating model required for the low cost housing segment. We delve deep into the implication of industrialization and devote a complete section to understand how lean and standardization can impact project management and design functions. The final section presents a road map to support a market based intervention. Source clytics community + analytics
Affordable Housing: Building mass housing in India On point 2.0 CITY CITY 2.0 is our commitment to urbanization in emerging markets. We believe technology data and innovation can be used to create disruptive solutions for providing access to basic services. With a focus on housing, energy and livelihood, CITY 2.0 integrates economics, operation research, and finance to create insights into these sectors. We work with our partners to create and support market based interventions. At clytics we put our faith behind what you measure you can improve. We are creating the next generation of knowledge platform to support decisions with data. Source clytics community + analytics
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