$300 house in india - business plan
TRANSCRIPT
A Proposal to make $300 house communities a
reality in India
Tuck $300 House India Team
We come from varied backgrounds and
nationalities
2
Nitin
Sharma
(India)
Antoine
Brousse
(France)
Sophie
Roux
(France)
Gaurav
Thapan-
Raina
(India)
Felipe
Valdez
(USA)
Our sincere THANKS to…
� Prof. Vijay Govindarajan
� Christian Sarkar
� Prof. Richard McNulty
� Pat Palmiotto and the
� Prof. Jack Wilson
� Kim Keating
� Penny Paquette
� MBAPO
� And many others
3
We have been involved in the project
since September 2010
4
Sep 13, 2010: First
Meeting with
Prof. VG
Nov 2010:Team comes
together
Jan 2011: Team starts researching
on $300 house project
Feb 2011:First
meeting with Jack
Wilson
Mar 4, 2011:
First blog goes live
Mar 5, 2011: 10-day India
trip; 3 cities, 15+
meetings
April 4, 2011:
Contact from
potential clients
April 24, 2011:Entry into
design contest
May 4 2011:Tenth
blog live
Key Milestones:
Our goals were more than a business plan
5
Business Plan
Humility
Empathy
Before providing any solutions,
we learned a lot about India and
ourselves
Affordable and
practical housing
solution
The optimism
towards life and
sheer strength of
people we met gives
us hope
400M INDIANS HAVE UNDER-
SERVED HOUSING NEEDS
THE HOUSING CHALLENGE IS ACUTE
Slums have developed organically and in
an ad-hoc way
New high-rise
buildings coming upAd-hoc slums just
beside these new
constructions
The builders and residents want these slums to be replaced by fancier building
complexes, posing a challenge to an existent economy.7
Living conditions are unhygienic and
dangerous
Stray animals, accumulated trash, and dirty sewage water are just outside the
residence. 8
Our KEY findings from the project
9
• Potential Indian market size of $40BAddressable market
• Retail cost of $1538Recommended price
• Simple designs that raise the living standard of residents
Design criteria
• Focus on building housing communities and not individual houses
Community focus
• Start small by operating in two states of Gujarat and Maharashtra
Geographies
• The challenge can’t be met alone; a strong set of alliances needed including substantial GOI support
Alliances
• Land procurement is a huge hurdle, and could pose potential risk to project implementation
Biggest hurdle: land
• Proactive and consistent execution is KEY for successIt’s all about execution
* GOI: Government of India
Existing constraints and our assumptions
10
Constraints identified Assumptions
� Willingness To Pay (WTP)
� Customers’ Emotional Attachment
� Land Availability
� Materials (~70% of total house cost)
� Labor (~30% of total house cost)
� Unit price is set at $1,538 (Rs. 68,000)
representing the lower limit of Government
grants for housing for EWS
� Houses should be constructed using strong
brick-like materials, and sanitary facilities
should be made available to the community
� Houses should be built on land that belongs
to customers or group of customers
(villagers) and/or Government
� Compressed Stabilized Earth Block (CSEB)
� Prospective owners can be employed in the
construction of the house helped by a
supervisor, hence providing employment
opportunities to the community
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
BUSINESS & EXECUTION PLAN
ITS ALL ABOUT THE EXECUTION
The low income housing market in India is
booming
12
Biadi, Rajasthan
2 projects
Bawal, Haryana
1 project
Meerut, UP
1 project
Nagpur, Maharashtra
1 project
Ahmedabad, Gujarat
6 project
Chennai, Tamil Nadu
2 projects
Mumbai, Maharashtra
10 projects
Pune, Maharashtra
2 projects
� 25 developers building or planning to
build low income houses across 7 states
� Prices range from Rs. 3 to 7 Lakhs i.e.
from $6,800 to $15,900
� Target customers are households
earning between $170 and $340 per
month
— Civil servants
— Office clerks
— Shop owners
� Gross margins are between 20% and
30%
� Projects’ returns between 40% and 50%
Map of low income housing projects in 2010 Key findings for this market
Source: Monitor Inclusive markets
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
0.1%
3%
2%
4%
8%
37%
46%
> $2,800
$1,400 - $2,800
$900 - $1,400
$570 - $900
$340 - $570
$140 - $340
Mo
nth
ly h
ou
seh
old
in
com
e (
US
D)
Potential demand : 2 MHH
Unit Price: > $55,000
Total Market size: US$ 133bn
Potential demand : 4 MHH
Unit Price: $20,000 – $55,000
Total Market size: US$ 127bn
Potential demand : > 21 MHH
Unit Price: $7,000 - $20,000
Total Market size: US$ 244bn
Numerous projects underway
Potential demand : 23 MHH
Unit Price: < $2,000
Total Market size: US$ 41bn
Largely underserved
< $140 = EWS
Total Addressable Market is huge and
underserved
13
Source: Monitor Inclusive markets, Indian Ministry of housing and Urban Poverty Alleviation
Urban income pyramid in India Total estimated market potential
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
46%
69%
18%
4.1m HHs facing housing shortage
(Maharashtra excl. Mumbai, Gujarat)
Average WTP1 = $1,800 (Rs. 79,000)
(e.g. Rajiv Aawas Yojana Scheme)
Market size: $7.4bn
(Maharashtra: $4.6bn, Gujarat: $2.8bn)
Gujarat and Maharashtra (excl. Mumbai)
represent approx. 20% of the total market
14
Number of Households targeted Market sizing
71.4
32.9
22.7
4.1
Total # of
urban HHs in
India
EWS HHs in
India
EWS HHs
facing house
shortage in
India
EWS facing
house
shortage in 2
target states
Source: Indian Ministry of housing and Urban Poverty Alleviation, Pratham
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
Typical community layout
15
12-house-communities sharing sanitary units
Total requirements
� ~30,000 blocks
— 413 tons of soil
— 41 tons of
cement
� ~5 roofs
� Equipment for 2
sanitary units only------------------------------------------------------------------------------------------------------
Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
House 1
(30m2)
House 2
House 3
House 4
House 5
House 6
House 7
(30m2)
House 8
House 9
House 10
House 11
House 12
Our execution model
16
Time 1 week
Buy 25 machines to
make CSEB
Capacity:
1,500 blocks / day
Send 5 machines
on site to make
the blocks
7 people / machine
5 to prepare site
Let the blocks
dry up
1 month to get
100% of strength
Finish
construction
with
supervisors
12 units in 5 days
with the help of 3
supervisors
Source: Hydraform, Our estimates
1 month 1 week
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
Price Breakdown (USD)
17
521
1,538
396 53 61
220
288
Cost of blocks
(house only)
Other
equipment (incl.
roof)
Cost of fuel Labor Sanitary unit
(1/12 of total
cost)
Gross margin Price
Total cost of house : $1,250 GM=19%
2,250
blocks @
23cts/block
Incl. roof
at $226
1/12 of total
sanitary cost of
$2,600Machine
operators +
supervisors
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
(698)
(41)
160
267 324
(123)
375 400 426
2012 2013 2014 2015 2016 2017 2018 2019 2020Initial investment FCF
Revenue and cash flow sequence
18
# of houses units built Cash flow sequence ($’000)
Replacement of
the 25 machines
after 5 years
Purchase of 25
new machines
+ facilities
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
-
450
1,200
1,800 1,920
2,040 2,160
2,280 2,400
0%
15%
40%
60%64%
68%
72%76% 80%
2012 2013 2014 2015 2016 2017 2018 2019 2020Houses built % capacity
Return on investment (IRR) is over 30% p.a.
SUSTAINING THE MOMENTUM...
PROTOTYPES, BLOGS, DESIGN CONTEST …
Our priority was to build awareness and
sustain the momentum
20
Media Content
10+ Blogs1000+
pictures
40+ minutes of usable
videos
Dartmouth-wide Effort
AllwinStudio Art with Jack
Wilson
Thayer Engineering
Students
Dartmouth SIGE
Awareness in India
Engagement with Non-
profits
Met with government
officials
Met with companies
Interacted with students
& faculty
Design Contest
We have a submission
Publish insights from
India
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
Promotional content
Tuck PR Tuck Today Video
Our submission to the design contest
21
A $300 House A $300 House Community
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
Interaction with Jack Wilson’s architecture and
design students at Thayer
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps 22
BUY-IN FROM PARTNERS IS ESSENTIAL
ALLIANCES ARE KEY FOR THE SUCCESS OF THIS PROJECT
We need partnerships with multiple
sectors
24
Government
• Central
• State
• Panchayats(Village Heads)
Civil Society
• Non-profits
• Architects
• Prospective Owners
Private Sector
• Investors
• Suppliers
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
Role of each partner
25
• Both at Central and State level; Subsidies through Rajiv Aawas Yojana; Constructions PermitsGovernment of India
• Easier to negotiate with village heads regarding WTP and # of houses to be built in a villagePanchayats (village heads)
• Prospective owners can get employment to construct their own housesProspective owners
• Their involvement with communities is valuable to understand local conditionsNon-profits
• Simple, aspirational design with the right materials is critical for successArchitects
• Consistent access to raw materials will help achieve economies of scaleSuppliers
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
… BUT THIS IS ONLY THE BEGINNING
A LOT HAS BEEN ACCOMPLISHED…
Critical next steps
27
• A prototype is KEY in convincing prospective ownersPrototype
• Find entrepreneurs ready to push this idea from prototype to pilotExecution
• Avail subsidies from Government of India to scale this projectAlliances
• Continue to raise awareness and build momentum around the projectMomentum
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Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
Summary of our KEY findings from the project
28
• Potential Indian market size of $40BAddressable market
• Retail cost of $1538Recommended price
• Simple designs that raise the living standard of residents
Design criteria
• Focus on building housing communities and not individual houses
Community focus
• Start small by operating in two states of Gujarat and Maharashtra
Geographies
• The challenge can’t be met alone; a strong set of alliances needed including substantial GOI support
Alliances
• Land procurement is a huge hurdle, and could pose potential risk to project implementation
Biggest hurdle: land
• Proactive and consistent execution is KEY for successIt’s all about execution
* GOI: Government of India
------------------------------------------------------------------------------------------------------
Challenge | Business Plan | Awareness Campaign | Alliances | Next Steps
OUR JOURNEY
VIDEO PRESENTATION