April 2011 Archives
April 30, 2011
$300 House Attracts More Media Coverage
http://www.jovoto.com/contests/300house/landing
Demand Analysis - The Indian Market Potential
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
The "Cost" of Being Poor
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
Design Criteria for $300 House
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:
o Hygiene
o Privacy
- 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
Rafael Smith: More Notes from Haiti
Smith is a judge in our Open Design Challenge.
Greetings from the $300 House Haiti Team
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
Insights from Trip to India
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
Shraya's Interview: The $300 House
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!
We
are not a formal organization - simply a collection of concerned
individuals and companies trying to find a solution to the problem of
low-cost housing for the poorest people on our planet. So our "job" is to
help people come together - across organizations, businesses and
governments - to solve the problem.
How do you plan to get the money to construct these houses?
Does your organization operate all around the world?
Yes
and no. We have members from all the different continents who have
signed on because they are interested in solving the problem. But we
are not a formal organization, so we don't spend any money operating
anywhere.
What are challenges in building houses outside the USA?
Great
question. The biggest challenge for poor people anywhere is money -
they don't have enough money to buy land or to buy a house. Sometimes
they lack the money to even rent a place to live and have to resort to
living in anything they can find that gives them some protection from
the elements.
Our hope is that we can create affordable houses which are comfortable
and durable enough to provide the poor with a safe place to live. Every
country has different issues, and we're going to have to understand what
they are to be successful.
Are you constructing any houses in India currently?
No,
not yet. But India is one of the countries we want to build a few test
houses, to see how they work. Other countries we are thinking about to
start this project are Haiti and Indonesia.
Are you working with other charities? If so what are they?
We
plan on working with charities and businesses. You see, we think
businesses can make money and help poor people at the same time. It's
simply a matter of designing the house at a price that poor people can
afford. We are also working with non-profits like the Solar Electric
Light Fund, and shortly, we hope, with Partners In Health. In India we
are talking to a number of non-profits as well. Of course, we welcome
everyone!
What type of problems have you encountered so far?
What
problems? If it was easy, the problem would have been solved a long
time ago. So we don't really view our difficulties as problems, but
rather as a way to learn. You can't run without falling, and we're
learning to fall quite well!
How has the response been so far about this initiative?
Tremendous.
We have people like you writing us - and we have almost 800 people from
all over the world who want to do something about this issue. It's
great!
What is it like being in this organization?
It's fun to
try to do something that most people think can't be done. And what will
be really cool is if we succeed! Wish us luck - and send in your design
for the $300 House.
VG and I love that kids are getting into this project along w/ the adults. Here's an example of a submission from another concerned citizen of the planet >>
April 7, 2011
Pictures from our trip to India
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