April 2011 Archives
April 30, 2011
Since we returned from India one month ago, we have just completed our first analysis on the market potential for the $300 house.
As mentioned in our previous post, our objective is to focus on the economically weaker sections (EWS) of the urban population in India. These households are facing three main issues. First and foremost, as shown on the table below, they have largely been excluded from traditional, affordable housing projects that were focused on the higher income population. Moreover, EWS represent the bulk of urban households facing a housing shortage: approximately 23 million out of the 33 million EWS urban households in India are currently facing housing shortages. Finally, due to their inherent socio-economic difficulties, EWS households are sometimes not even aware of government schemes and programs that could improve their housing conditions.
Based on our analysis, we have estimated the total market potential to be $41 billion in India and $8 billion in the three states where we will first focus our attention: Maharashtra (excluding Mumbai), Gujarat , and Chhattisgarh. As with any other market, we have estimated its size by combining the potential volume with the customers' willingness-to-pay (WTP). Potential volume logically represents the total of EWS households facing house shortage in India (i.e. approx. 23 million), while WTP has been estimated as the average government subsidy that EWS households are entitled to receive under various government schemes such as the Rajiv Aawas Yojana scheme (i.e. approx. Rs. 79,000).
These numbers are based on a preliminary analysis and may change in the future as we refine our work and integrate other information.
April 25, 2011
A few weeks ago the Haiti $300 House team had a research call that got us thinking about the "cost" of being poor; it left us with both concern and hope for those at the bottom of the pyramid. In this conversation, we learned that the majority of Haiti's slum dwellers pay rent - perhaps more than 80% of them. This is often a payment made to middle-/upper-class landlords and/or gangs. They also pay for their water, which has to be brought in by truck or purchased in bottles. When you consider this, plus the costs of medicine needed due to unsanitary conditions, you start to realize how truly expensive it is to be a poor Haitian.
As you step back and think about it, this is not a unique phenomenon. Here in the U.S., there are similar high "costs" for the poor. If for example a low income family needs medicine, they might put it on a credit card and incur 20% interest until it is completely paid. In contrast, someone with more income might charge it then pay it in full, earning 1% cash back from the same credit card provider. The pattern holds true for purchasing staples as well: a relatively wealthy person can buy paper towels in bulk at a lower cost, while a low income person can only afford to buy paper towels in the more expensive single-package form. So across the globe it appears that the cost of everyday life is actually higher for the poor.
It is easy to see this "cost" of being poor as an insurmountable problem. After all, how can we help the bottom of the pyramid pay for all of the "costs" they are facing? But these costs are exactly what make the $300 House concept feasible. What if rather than subsidizing the bottom of the pyramid to help them meet the high costs, we reduce the costs by offering cheaper alternatives? If the slum dwellers in Brazil are paying $8 per week for housing - as I recently learned from a documentary - why couldn't they spend the same for a mass produced shelter with built in water purification? If this shelter cost $300, it would take less than one year to pay for it in full. With micro-financing over a longer period, the cost of housing could be greatly reduced for slum dwellers.
The $300 House idea is appealing to us because it is self-sustaining. Profit seeking businesses would be interested in it for its potential revenue streams: 1.) selling the house, 2.) selling add-ons (accessories, water purifiers, solar panels, etc.), and 3.) developing a market by improving health/sanitation, leading to greater consumer spending power. While it is difficult to show a business the impact of a healthier market with greater spending power, it is relatively easy to demonstrate the immediate revenue opportunity from selling the house. If a business can provide a safe, healthy living environment that is priced below slum dwellers current "costs", it can take the slum dwellers' rent payment away from current landlords (who often care very little about the conditions of their property and tenants). The business makes money by shifting and perhaps even lowering the cost burden of the poor, and in return slum dwellers pay the same or less for much improved conditions. The current "costs" for the poor are therefore an opportunity for businesses to improve the lives of those at the bottom of the pyramid.
When looked at in this light, the "cost" of being poor can also be seen as an opportunity and entry point for improvement. So, while it concerns us, it also brings us hope.
April 24, 2011
Greetings again from the $300 house project team here at Tuck school of Business at Dartmouth!
To recap our updates thus far, we have introduced our team (here), we gave a brief update when we were in India with couple of photos, and followed it up with more photos on our return to US. We also wrote a brief blog regarding some high-level insights from our India trip (here).
Over the past 2-1/2 months, we have focused on determining what would it take to make this project a reality in India. We have had several internal meetings with various stakeholders, spent several hours researching this topic, read hundreds of articles, explored the work that is already being done in this space, and seized the opportunity for our entire team to visit India in early March. Today, in this blog, we will distill some of our key findings, especially with regard to the design of the $300 house. We strongly feel that meeting these requirements is imperative to ensure the success of this project. We also hope that our findings will help the broader community of designers, architects, and interested folks to gain additional insights. At the same time, we hope to obtain valuable feedback from all of you.
We seek to answer two main questions:
- What are the most important design criteria (requirements) for a $300 house in India?
- What would this house look like?
Most important design criteria
Based on our visit to several slums in Mumbai and Raipur, and through our surveys with the inhabitants of these slums, we have established the following key criteria to guide the construction of a $300 house. Please note that these do not apply to all the houses in slums, but to the majority that we visited.
- Sunlight: A lot of these slum houses do not have any windows or doors. Upon entering these houses, the rooms are dark, and they remain dark throughout the day. In houses where there is no electricity, this problem is even more acute because families, when inside, are spending their time in darkness or in lantern. (Note: there is one door to enter the house, but it is usually covered by a bed sheet or plastic sheet to maintain some privacy).
- Ventilation: With no doors or windows inside the house, and no specific outlets for ventilation, fresh air does not circulate the house.
- Height of 10 feet: When some of us entered the house, we could not stand straight. We had to bend to talk to these residents. Height of the ceilings is a big issue in these houses, where the houses are less than 6 feet in height. Hence, we think that having at least 10 feet of height has the following benefits:
o Allows opportunities to create outlets for light and ventilation
o Creates perception of larger house space
o Provides an opportunity for the residents to build additional structures (like a small loft or additional storage space)
- 225 Square Feet: Most houses that we visited ranged from about 90 sq. ft. to 180 sq. ft. We think that these houses, if possible, should be at least 225 sq. ft. in size. We borrow this number from the fact that the Government of India is making houses of at least 225 sq. ft. in places like Dharavi and New Raipur as part of their initiative to provide low-income housing. This requirement could be tougher to meet because of land issues. But in places where the land is owned by the residents themselves, and possibilities exist to redesign the house (albeit for a cheaper cost), the size should be an important criteria.
- Current family size: Most families are 4-5 members in size; 2 parents and 3 kids.
- Private showers: Most of these houses do not have bathrooms, leaving the residents to go and shower publicly. If public showers are available, they use that; but in our observation, most residents take showers right outside their own houses, leaving no privacy for these residents, especially women and girls. Also, these activities cultivate an unhygienic environment in the neighborhood and community increasing dirt and accumulation of trash. Hence, having a shower inside a house is important for two reasons:
- Communal restroom per 10 families: Similarly, private restrooms in each house are missing. We also heard and read that restrooms can get very expensive to build in each and every house. Additionally, our observations tell us that community restrooms, where 10 families use a public restroom, separate for men and women are working well today. We would like to propose the same. From a cost perspective, this helps is average the cost of a single restroom across 10 (or so) families, while providing these facilities, which are then maintained by the respective owners. A key for these restrooms is available to each of these 10 families.
- Security (and ownership): As mentioned earlier, most houses had small doors to enter the house, but no way to protect anyone from entering. These doors are usually covered with bed sheets or plastic sheets (for privacy reasons), but anyone can enter the house at their will. This prevents building a sense of security and a sense of complete ownership for this house. We feel providing a closed door is critical in elevating the living conditions of these people. While they might not have a lot of items that people could steal, it is the perception of ownership that matters.
- "Pucca" houses: This is an important criterion. Many of the houses that we visited were built from mud, cow dung, tin roofs, bamboo, and plastic sheets. They are falling apart. It is important to provide a pucca house (pucca means strong). This could be in the form of concrete or other materials. The choice of material is important here because of the perception of people to move to a $300 house from their existing homes.
The last point is important and deserving of further explanation. Please note that the $300 house can be targeted to two sets of people: (1) Those who own a house that is currently falling apart; AND (2) those who do not own a house. For those who own a house, they need a set of reasons to catalyze them to move to a $300 house. What are they? We think the above list captures the most important ones. These criteria are not new, and nothing fancy, but the fact that the current residents do not enjoy these is a BIG ISSUE. If we could meet the goal of providing these features at a decent cost, there is a very STRONG INCENTIVE for the current residents to upgrade. In other words, our housing design needs to cross a certain threshold of aspirational value that would convince the current residents to shift to a $300 house. This is a critical part of the design!
Additionally, we have also captured additional criteria and grouped them in three separate categories:
- More requirements:
o Resistance to heat
o Resistance to heavy rain/floods
o Resistance to fire
o Water tank
o A sink
o Scalable design and material so it is not problematic to build these houses in scale
- "Nice to Have" for the house include:
o Flexibility: modularity to expand the house beyond what it is
o Small porch
o A few steps at the front to prevent mud, rain, etc.
o Gutter to collect rain water
More about community amenities:
As alluded to earlier, we believe that one of the ways to reduce costs and stay within budget is to provide some of the basic services for the community rather than for each individual house. We would need a big tank and a water filtration system to clean the rain water or other water collected and provided people with a source of potable water which could be different than the tank they need for their shower water for instance. We would also need a community restroom. Our estimate is that we would need one for every 10 houses (50 people), which would constitute a marked improvement over what currently exists. The restroom should be self-sufficient (i.e. compost, etc.). Luxury items would include a space for washing clothes, a community center, etc. but are not required and certainly very challenging given the budget.
What would this house look like?
Based on the above criteria, we tried to brainstorm as a group to envision the design and layout of this house. Subsequently, a few MBA students went on to realize their design in the form of a Google Sketch Up design. Please note that the below designs are just conceptual in nature, and do not meet the scale requirements. It is just a first attempt at prototyping, with aim of building upon this protoype, and refining it even more. We hope these sketches will help initiate a collective discussion regarding some of the requirements we mentioned above. (One of the skills which our group lacks is experience in design/architecture).
A single house design
A community of 10 houses with a common restroom and water storage
April 20, 2011
Sam Padgett (samuel dot padgett at tuck.dartmouth.edu)
Sam graduated from Middlebury College in 2006 with a B.A. in Chinese and Economics. After college he worked in Portsmouth, NH at a boutique strategy consulting firm that focused on business intelligence. In 2007 he joined Deloitte Consulting in New York City where he worked primarily on compensation consulting. While at Deloitte, Sam initiated and grew Deloitte's New York City offices' relationship with Habitat for Humanity, leading several group volunteer trips to Habitat sites in New Jersey. Sam believes strongly in the power of economic motivation to help solve social problems, and he is interested in applying his hands-on building and consulting experience to bring the $300 House idea to fruition.
Amith Mohan (amith dot mohan at tuck.dartmouth.edu)Amith graduated from R.V.College of Engineering, Bangalore, in 2003 with a B.E in Computer Science. After college, he worked with a software technology company called Infosys Technologies Limited. Amith spent the last 4 years consulting with financial services clients across the United States. Outside of work, Amith has been actively volunteering with a nonprofit organization called Vibha, where he helped raise funds to support the education and health-needs of the underprivileged children in India. Amith is a strong believer in the power of collaboration and empowering the rural population through education, and he is interested in applying his technology background and nonprofit experience to bring the $300 House idea to reality.
Soni Mistry (soni dot mistry at tuck.dartmouth.edu)
Soni is a first-year student at the Tuck School of Business. She has completed Computer Engineering from Mumbai University. With total seven years of experience in IT consulting, Soni has worked with Lehman Brothers, Mumbai and University of Cambridge, UK. In several complex business situations, Soni has leveraged her analytical and technical background to reengineer business processes and operations. Her business experience in client management with wide range of industries such as education, hotel, manufacturing, and banking has taught her to think creatively to find practical solutions to business problems.. Soni is self-motivated and a passionate person by nature, and she enjoys taking up new challenges. During her leisure time she enjoys music, cooking, and photography. She thinks $300 House-For-The-Poor- Project #2: Haiti project is big step toward improving the lives of billions of people by providing them an affordable house to live in and at the same time creating new consumer markets. She believes that this project will give her opportunity to work on the novel cause and allow her to make contribution towards society. At the same time this project will provide her with a platform to apply the past experience, and lessons at Tuck to real life scenarios. She will learn about housing industry and challenges in implementing/executing large scale projects. She is very excited to be part of this project.
Pablo Carbonell (pablo dot carbonell at tuck.dartmouth.edu)
A native from Montevideo, Uruguay, Pablo graduated from Universidad de la Republica in 2006 with B.Sc. in Computer Engineering. He worked from 2000 to 2008 at Gerdau, a company that produces and sells long steel products. Among those products was "Gerdau Casa Facil", a pre-built steel structure for low cost houses. While at Gerdau, he was a member of the Social Responsibility committee in Uruguay, contributing in initiatives for the community surrounding the company's installations. In 2008-09 he coordinated the start of todopc.com.uy, a website that sells computer parts in Uruguay. Most recently in 2009-10 he has been working at Deloitte Consulting in a project in a bank to change its main information system. Pablo spent six months traveling in Europe and South America. He is currently pursuing an MBA degree from The Tuck School of Business at Dartmouth.
Jonathan Baumann (jonathan dot baumann at tuck.dartmouth.edu)
Jonathan is native from Munich, Germany and graduated from the International University in Germany in 2005. He worked as Assistant Managing Director for WANZL the world leader in Super market Equipment. Jonathan also restructured a machinery company for structural steel in Germany. He has a strong background in general management and operations in the manufacturing industry. Jonathan is very active to make companies more sustainable and was able to reduce the water consumption by 80% at WANZL, installing a one of a kind cooling system in production and the newest water cleaning devices to recycle water used in the galvanic. He modernized WANZL's heating system for the paint ovens, galvanic and central heating to use 25% less natural gas. Jonathan is currently pursuing an MBA program at the Tuck School of Business at Dartmouth College. When he read about the $300 House project he was immediately very interested and committed to start on the project for Haiti.
April 10, 2011
Our trip to India in March was instrumental in helping us better understand the landscape, scope, and challenges of building a $300 house. As a result of our visiting several slums in urban and rural India, and our meetings with stakeholders in the private sector, government, and NGOs, we now understand the demand side of the equation and will focus our energies on the supply side. The resounding message we heard from everyone was "if you can build it, we will buy it." In terms of geographic focus, we learned that big urban centers such as Mumbai or New Delhi should not be our focus, but rather Tier 2 and 3 cities, where people live in shabby, makeshift homes or do not have homes at all. Cities are undergoing immense urbanization and local politics coupled with expensive land prices would make it difficult to build a $300 house. We were surprised to learn about slum dwellers' aspirations for upward mobility. In Tier 2 cities or towns, although the local governments are beginning to address the issue of low-income housing, they are not targeting the economically weaker sections (EWS). Yet EWS account for nearly 90% of people facing a housing shortage in India, mainly because they represent the bulk of rural-urban migration in the country. According to the Indian Government, housing shortage in urban areas for EWS will significantly increase in the coming years. As a result, our objective should be to develop affordable housing for Indians in the EWS who are migrating to Tier 2 and 3 cities. We have identified several potential customers for the $300 house. The government could be a potential customer under the Rajiv Aaways Yojana, a housing scheme in which the government subsidizes housing for low-income populations. Other customers could include migrant workers and local service provides such as housekeepers, nannies, and watchmen. Additionally, the $300 house could serve as temporary housing (post-disasters) or as rental housing, as some people might simply want to rent low-cost housing until they find permanent housing. Finally, there is the possibility that middle-class Indians might be interested in buying a $300 house as a home for their servants. While the obtaining land will be challenge, we must focus on building on a $300 house that fully leverages existing or new technology.
Our trip to India in March was instrumental in helping us better understand the landscape, scope, and challenges of building a $300 house. As a result of our visiting several slums in urban and rural India, and our meetings with stakeholders in the private sector, government, and NGOs, we now understand the demand side of the equation and will focus our energies on the supply side. The resounding message we heard from everyone was "if you can build it, we will buy it."
In terms of geographic focus, we learned that big urban centers such as Mumbai or New Delhi should not be our focus, but rather Tier 2 and 3 cities, where people live in shabby, makeshift homes or do not have homes at all. Cities are undergoing immense urbanization and local politics coupled with expensive land prices would make it difficult to build a $300 house. We were surprised to learn about slum dwellers' aspirations for upward mobility. In Tier 2 cities or towns, although the local governments are beginning to address the issue of low-income housing, they are not targeting the economically weaker sections (EWS). Yet EWS account for nearly 90% of people facing a housing shortage in India, mainly because they represent the bulk of rural-urban migration in the country. According to the Indian Government, housing shortage in urban areas for EWS will significantly increase in the coming years. As a result, our objective should be to develop affordable housing for Indians in the EWS who are migrating to Tier 2 and 3 cities.
We have identified several potential customers for the $300 house. The government could be a potential customer under the Rajiv Aaways Yojana, a housing scheme in which the government subsidizes housing for low-income populations. Other customers could include migrant workers and local service provides such as housekeepers, nannies, and watchmen. Additionally, the $300 house could serve as temporary housing (post-disasters) or as rental housing, as some people might simply want to rent low-cost housing until they find permanent housing. Finally, there is the possibility that middle-class Indians might be interested in buying a $300 house as a home for their servants.
While the obtaining land will be challenge, we must focus on building on a $300 house that fully leverages existing or new technology.
April 9, 2011
The following questions were sent to VG and Christian by Shraya, a 4th grader in Miss Mancosh's class. Her mentor for this project is Miss Emily Pasquale. Thanks for your questions, Shraya!
April 7, 2011
After two weeks in India, we have been lucky enough to visit both city and rural slums. The findings are helping us progress and we will post some of our takeaways shortly. In the meantime, a few picture so you can all share our experience in India.
Dharavi from the second floor of a house: an overbuilt, very developed and crowded slum
One of the poorest areas of Nehru Nagar in Mumbai
Mahalaxmi Canal Slum in Raipur: the combination of illegal land and no sanitation services
The inside of a house
On the positive side: India slum dwellers optimism is very refreshing and a significant portion of the children we met were going to school
Thank you to all the people that have let us take pictures and videos during the trip.
The Tuck FYP $300 House India Team