$300 House in India - Business Plan

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

------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------------------------------------


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


Unit Price: $20,000 – $55,000


Potential demand : > 21 MHH

Unit Price: $7,000 - $20,000


Numerous projects underway


Unit Price: < $2,000


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

------------------------------------------------------------------------------------------------------


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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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------------------------------------------------------------------------------------------------------


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

------------------------------------------------------------------------------------------------------


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

------------------------------------------------------------------------------------------------------


(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

------------------------------------------------------------------------------------------------------


-

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

------------------------------------------------------------------------------------------------------


Promotional content

Tuck PR Tuck Today Video

Our submission to the design contest

21

A $300 House A $300 House Community

------------------------------------------------------------------------------------------------------


Interaction with Jack Wilson’s architecture and

design students at Thayer

------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------------------------------------


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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… 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

------------------------------------------------------------------------------------------------------


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

------------------------------------------------------------------------------------------------------


OUR JOURNEY

VIDEO PRESENTATION

QUESTIONS?

KEEP THE CONVERSATION GOING AT:

http://www.300house.com

[email protected]

$300 House in India - Business Plan

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