NICMAR
NICMAR
AFFORDABLE HOUSING: STUDY OF DIFFERENT ASPECTS, FINANCIAL MODELLING AND FEASIBILTY ANALYSIS OF DIFFERENT TECHNOLOGIES AT VK-NARDEP, KANYAKUMARI
By SHIVAM JOSHI NACHIKET LANDE KSHITIJ PANTA PGP ACM 24th Batch (2010- 2012)
Under the Guidance Prof. DEBOPOM ROY
A Thesis submitted in partial fulfilment of the Academic requirements of the Post Graduate Programme in Advanced Construction Management (PGP ACM)
NATIONAL INSTITUTE OF CONSTRUCTION MANAGEMENT AND RESEARCH Pune Campus
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NICMAR DECLARATION
I/We declare that the project thesis entitled ―Affordable housing: study of different aspects, financial modelling and feasibility analysis of different technologies at VK-NARDEP, KANYAKUMARI‖ is the bonafide work carried out by us, under the guidance of Prof. Debopom Roy, further we declare that this has not been previously formed the basis of award of any degree, diploma, associate-ship or other similar degrees or diplomas, and has not been submitted anywhere else.
Shivam Joshi(241077)
Nachiket Lande(241093)
Kshitij Panta(241132) . PGP ACM 24th Batch (2010-2012) NICMAR Pune
Date: 04-02-2012 Place: PUNE
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NICMAR
CERTIFICATE
This is to certify that the project thesis entitled ―Affordable housing: study of different aspects, financial modelling and feasibility analysis of different technologies at VK-NARDEP, KANYAKUMARI‖ is the bonafide work of Mr. Shivam Joshi, Mr. Nachiket Lande and Mr. Kshitij Panta in partial fulfilment of the academic requirements for the award of Post Graduate Programme in Advanced Construction Management (PGP ACM). This work is carried out by him/them, under my guidance and supervision.
Guide
(Prof. DEBOPOM ROY)
Prof A.D.Gosavi (Head : ACM)
Date: 04-02-2012 Place: PUNE
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NICMAR
ABSTRACT Low Cost Housing is a new concept which deals with effective budgeting and following of techniques which help in reducing the cost of construction through the use of locally available materials along with improved skills and technology without sacrificing the strength, performance and life of the structure. There is huge misconception that low cost housing is suitable for only sub standard works and they are constructed by utilizing cheap building materials of low quality. The fact is that Low cost housing is done by proper management of resources. Economy is also achieved by postponing finishing works or implementing them in phases. Present project study concentrates on: Redefining Affordable housing: Comparison between the suppliers conception and the buyers conception Financial models Buying Behavior Studying materials and technology for low cost construction
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CONTENTS 1. INTRODUCTION
13
1.1 OBJECTIVE OF THE STUDY
15
1.2 METHODOLOGY
16
1.2.1 REDEFINING AFFORDABLE HOUSING
16
1.2.2 FINANCIAL MODEL
16
1.2.3 HUMAN BEHAVIOUR TOWARDS AFFORDABLE HOUSING
16
1.2.4 TO STUDY NEW MATERIALS FOR AFFORDABLE HOUSING
16
2.0 LITERATURE REVIEW: LOW COST HOUSING
17
2.1INTRODUCTION
17
2.2. HISTORY OF LOW COST HOUSING
18
2.2.1 INTERNATIONAL
18
2.2.2. INDIA
20
2.3 CONCEPTIONS AND MISCONCEPTIONS
IN AFFORDABLE 21
HOUSING RESEARCH AND PRACTICE
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NICMAR 2.4 NEED FOR COST EFFECTIVE LOW INCOME HOUSING
22
2.5 FINANCIAL ASPECTS OF LOW COST HOUSING
23
2.5.1 DEMAND FOR LOW INCOME HOUSING FINANCE
24
2.5.2 SUPPLY OF FINANCE FOR LOW INCOME HOUSING
25
2.5.3 MODELS OF LOW INCOME HOUSING FINANCE
27
2.5.4 GOVERNMENT PROGRAMMES
27
2.5.5 HOUSING MICROFINANCE – DIFFERENT APPROACHES
28
2.5.6 CONSTRUCTION SERVICES AND TECHNICAL ASSISTANCE
29
2.6 LIFE STYLE THEORIES
30
2.6.1
INCORPORATING
LIFE-STYLE
THEORIES
INTO
A 31
COMPREHENSIVE RESEARCH PROCESS 2.6.2 LIFE STYLE THEORIES: PHILOSOPHY
31
2.6.3 DESIGNING AND TESTING A TOOL FOR AFFORDABLE 33 HOUSING RESEARCH 2.7 MATERIALS
35
2.7.1 TYPES OF BUILDING MATERIALS
35
2.7.1.1 TRADITIONAL MATERIALS
36
2.7.1.2 CONVENTIONAL MATERIALS
36
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NICMAR 2.7.2
BRIEF
DESCRIPTION
OF
FEW LOW
COST
BUILDING 36
MATERIALS 2.7.2.1 IMPROVEMENT OF MUD
36
2.7.2.2 STABILIZATION
36
2.7.2.3 NON-ERODABLE MUD PLASTER
36
2.7.2.4 TERRA-COTTA SKIN TO MUD WALLS
37
2.7.2.5 IMPROVED THATCH ROOF
37
2.7.2.6 WARDHA TUMBLER TILES
37
2.7.2.7 FERRO-CEMENT
37
2.7.2.8 FLYASH-SAND LIME BRICKS
38
2.7.2.9 CLAY FLYASH BURNT BRICKS
38
2.7.2.10 FLYASH BASED LIGHT WEIGHT AERATED CONCRETE 38 WALLING AND ROOFING BLOCKS 2.7.2.11 CEMENT BONDED FIBER ROOFING SHEETS
38
2.7.2.12 CLAY RED MUD BURNT BRICKS
38
2.7.2.13 GYPSUM BASED CEILING TILES, PANEL BLOCKS AND 39 DOOR/WINDOW SHUTTERS 2.7.2.14 PRECAST STONE BLOCKS
39
2.7.2.15 PRECAST HOLLOW CONCRETE BLOCKS
39
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NICMAR 2.7.2.16 PRECAST RCC DOOR AND WINDOW FRAMES
39
2.7.2.17 PRECAST PLANK AND JOIST FLOORING/ROOFING
39
2.7.2.18 HALO-PAN SYSTEM
39
2.7.2.19 RICE HUSK AS BUILDING MATERIAL
39
2.8 SUMMARY
40
2.8.1 FINANCIAL ASPECT
40
2.8.3 LIFE STYLE THEORIES
41
2.8.4 MATERIALS
41
3.0 DEFINING LOW COST HOUSING
42
3.1 URBANISATION DEMAND DRIVER FOR ALL AFFORDABLE 42 HOUSING IN INDIA 3.2 AFFORDABLE HOUSING-TIME TO DEFINE IT
42
3.3 SUPPLY SIDE (DEVELOPERS) VIEW
43
3.4 DEMAND SIDE (CONSUMER POINT OF VIEW)
43
3.4.1 METHODOLOGY FOLLOWED
43
3.4.2 SCOPE AND LIMITATIONS
44
4.0 FINANCIAL MODEL
49
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NICMAR 4.1
COSTS
OF
SLUM
UPGRADING
AND
HOUSEHOLD 50
AFFORDABILITY ANALYSIS 4.2 NAGPUR AFFORDABILITY ANALYSIS: HOUSING LOANS AND 52 SUBSIDIES FOR SLUM UPGRADING IN NAGPUR 4.3 EQUITY CONCERNS AND LEVERAGING SUBSIDY FUNDS IN 53 NAGPUR 4.4 SIMULATIONS OF THE RESOURCE MOBILIZATION CAPACITY 54 OF HOUSEHOLDS 4.5
PROJECT
CROSS-SUBSIDIZATION
AND
LOWER
COST 55
APPROACHES TO CONSTRUCTION 5.0 HUMAN BEHAVIOUR TOWARDS LOW COST HOUSING
60
5.1 BUYING DECISION PROCESS
60
5.2 DECISION MAKING AS PROBLEM SOLVING:
60
5.3 RECOGNITION OF AN USATISFIED NEED:
61
5.4 CHOICE OF AN INVOLVEMENT LEVEL
62
5.5 IDENTIFICATION OF ALTERNATIVES
63
5.6 EVALUATION OF ALTERNATIVES
64
5.7 POST PURCHASE BEHAVIOR
65
5.8 SOCIAL AND GROUP FORCES
65
5.9 CULTURAL INFLUENCES
65
5.10 INFLUENCE OF SUBCULTURES
66
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NICMAR 5.11 SOCIAL CLASS INFLUENCES
66
5.12 REFERENCES-GROUP INFLUENCES
67
5.13 FAMILY AND HOUSEHOLD INFLUENCES
67
5.14 PSYCHOLOGICAL FACTORS
67
5.15 MOTIVATION- THE STARTING POINT
68
5.16 CLASSIFICATION OF MOTIVES
69
5.17 PERCEPTION
69
5.18 LEARNING
71
5.19 PERSONALITY
71
5.20 ATTITUDES
72
5.21 SITUATIONAL INFLUENCES
73
5.22 ANALYSIS OF THE SURVEY DONE
74
6.0 VK NARDEP CASE STUDY
77
6.1 INTRODUCTION
77
6.2 BACKGROUND OF THE STUDY
77
6.3 SALIENT FEATURES
78
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NICMAR 6.3.1 ROOFING
79
6.3.1.1 REINFORCED BRICK PANEL SLAB
79
6.3.1.2 FERRO-CEMENT ROOF SLABS
81
6.4 FERRO-CEMENT DOORS AND WINDOWS
83
6.5 FERRO-CEMENT TOILET
85
6.6 THE PROPOSED MODELS
86
6.7 COST ANALYSIS OF THE FERRO-CEMENT PANELS FOR WALLS 91 AND ROOFS 6.8 COST ANALYSIS OF REINFORCED ROOF PANEL
92
6.9. SANITATION
92
7.0 CONCLUSION
94
8.0 REFERENCE
96
9.0 APPENDIX
98
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NICMAR CHAPTER 1 1. INTRODUCTION ―LOW COST HOUSING‖ as a concept is very generic and could have different meanings for different people based on differences in income levels. Affordable housing refers to any housing that meets some form of affordability criterion. Different countries have defined affordable housing to present the economic potential of an individual buying a house. In the United States and Canada, a commonly accepted guideline for affordable housing is that the cost of housing should not be more than 30 percent of a household's gross vary with regions and income levels. Another point to note is that the definition of affordable housing is not just restricted to the three categories mentioned above, but applies to people across the country. Affordable housing can be defined using three key parameters viz. income level, size of dwelling unit and affordability. While the first two parameters are independent of each other, the third parameter is correlated income. Housing costs here include taxes and insurance for owners, and utility costs. If the monthly carrying costs of a home exceed 30–35 percent of household income, the housing is considered unaffordable for that household. Defining affordable housing in India is a difficult task given that at every square kilometre of the country, the dynamics of the market are different. The rising demands on affordable housing in INDIA and the increasing interest of developers to invest in affordable housing projects mandates a clearer understanding and appreciation of the lifestyles and cultural values of the local society. Dealing with affordable housing as products or commodities only results in less than appealing and depressing environments that do not meet basic needs or satisfy the preferences of potential users. The economic crisis shadowing India is leading to rise of interest rate and credit unavailability. The real estate developers in such circumstances are having difficulties to find buyers for premium apartment. This has inspired as well as impelled developers towards cost effective housing. This project studies cost effective and eco friendly construction using pre-engineered building for affordable housing project of Amuthasurabhi, Self Help Group Federation for rural women, at Avuai Agam (VKNARDEP). This study encompasses
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NICMAR the salient features of these cost-effective technologies. The materials and the technology utilized are analysed in this paper. Some of these include: Aesthetically pleasing and environmental friendly Ferro-cement doors, Ferro-cement roofing channel, Pr-engineered Ferro-cement Toilets, Different types of filler Slabs. The objective of the paper is to study the feasibility of using this model for affordable and eco-friendly housing projects.
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1.1 OBJECTIVE OF THE STUDY The following are the objectives of the present study: 1) To Redefine the meaning of Affordable Housing by comparing 2) To study the financial aspects of affordable housing. 3) To study the behaviour of the buyer towards affordable house. 4) To study materials and technology used in affordable housing
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NICMAR 1.2. METHODOLOGY FOLLOWED:
1.2.1 REDEFINING AFFORDABLE HOUSING To gain insights on supply side perspective on potential price points for providing affordable housing. Ernst and young has obtained views from more than 100 developers and institutional investors in India. To understand whether the price points which are given by the developers are in line with the affordability of typical LIG/MIG categories of end consumers. An attempt have been made to estimate achievable price points of such consumers based on their income levels. The detailed methodology which is followed is given in the respective chapters.
1.2.2 FINANCIAL MODEL: An attempt has been made to study the source of financing for the slum up gradation in the Nagpur region by: 1. Household affordability 2. The loan absorption capacity of borrowers 3. The creditworthiness of the households from the perspective of financing institutions
1.2.3
HUMAN
BEHAVIOUR
TOWARDS
AFFORDABLE
HOUSING The factors which affect a consumer to buy a house is merged with respect to the affordable housing and a survey is done through a questionnaire which gives an idea about what are needs and expectations of a consumer.
1.2.4
TO STUDY NEW MATERIALS FOR AFFORDABLE
HOUSING This project studies cost effective and eco friendly construction using pre-engineered building for affordable housing project of Amuthasurabhi, Self Help Group Federation for rural women, at Avuai Agam (VKNARDEP). This study encompasses the salient features of these cost-effective technologies. The materials and the technology utilized are analysed in this paper. Some of these include: Aesthetically Page 15
NICMAR pleasing and environmental friendly Ferro-cement doors, Ferro-cement roofing channel, Pr-engineered Ferro-cement Toilets, Different types of filler Slabs. The objective of the paper is to study the feasibility of using this model for affordable and eco-friendly housing projects.
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NICMAR CHAPTER 2
2.0 LITERATURE REVIEW: LOW COST HOUSING 2.1INTRODUCTION Low Cost Housing is a new concept which deals with effective budgeting and following of techniques which help in reducing the cost construction through the use of locally available materials along with improved skills and technology without sacrificing the strength, performance and life of the structure. There is huge misconception that low cost housing is suitable for only sub standard works and they are constructed by utilizing cheap building materials of low quality .The fact is that Low cost housing is done by proper management of resources. Economy is also achieved by postponing finishing works or implementing them in phases. [7] The term Low-cost housing might mean different things to different people. For instance, in a developed country, USA, housing can be considered affordable for a low or moderate-income earner if that household can acquire use of that housing unit (owned or rented) for an amount up to 30 percent of its household income [Miles et al, 2000]. Mortgage lenders also use this standard as one important criterion in qualifying buyers of market-rate housing for mortgage loans. In developing countries, only up to 20% of the population who in actual fact constitute the higher income earners would be able to afford such housing units. The low-income group in developing countries are generally unable to access the housing market through the mortgage institutions. Housing requirements for this group are both urban and rural based. In 1991, statistics indicated that about 70% of Nigerians fall in this category. This situation has not changed. The rising demands on affordable housing and the increasing interest of developers to invest in affordable housing projects mandates a clearer understanding and appreciation of the lifestyles and cultural values of the local society. Dealing with affordable housing as products or commodities only results in less than appealing and depressing environments that do not meet basic needs or satisfy the preferences of potential users.[4] To many architects, engineers, and developers, the terms ―affordable housing‖, ―design‖, and ―the preferences and lifestyles of the targeted populations‖ are Page 17
NICMAR exclusive and are looked at in isolation. Once the goal of providing quality design and once the goal of understanding people preferences and their lifestyles enter the discussion, it is generally assumed that the cost will automatically increase. When production techniques are developed to provide genuinely affordable housing, effort is often focused on cost reduction only while preferences and lifestyle aspects are overlooked. Theorists like Alexander, and Burnham argue that it has proven difficult to strike a harmonious balance.
SOURCE: KPMG FIGURE 1
2.2. HISTORY OF LOW COST HOUSING 2.2.1 INTERNATIONAL The first formal housing cooperative on record was organized in the mid nineteenth century in Germany. By the early twentieth century, housing cooperatives were found throughout Europe, but predominantly in Germany and the Scandinavian countries (International Labour Office, 1964). Though the first housing cooperative in the United States, called a "home club", was established in New York City in 1876, cooperatives did not become well established in the United States until after World Page 18
NICMAR War I. Housing cooperatives then took two forms: the first, exclusive apartment dwellings for high-income families to assure them of "appropriate" neighbours; the second, cooperatives organized by ethnic immigrant groups, and/or unions to provide affordable housing for their members during the post-World War I housing crunch. The first housing cooperative in the United States organized under the Rochdale Cooperative Principles2 was developed in Brooklyn, New York in 1918 by a group of Finnish artisans - the Finnish Home Building Association. By 1926, twenty-five such Finnish cooperatives were in operation within a seven block radius of Sunset Park. All survived the depression, because most had no mortgages. These cooperatives provided affordable housing for low and moderate income families, but they are not limited equity cooperatives (LECs) in the technical sense of having financial limits on the resale of membership shares. By 1925, housing cooperatives had been constructed in sixteen cites in the United States. Most of these cooperatives were high-income cooperatives. About half of the cooperatives in the United States were found in New York City, but they also were important in such cities as Chicago, Detroit, Buffalo, San Francisco, and Philadelphia (Siegler and Levy, 1986). Before 1983, the Chinese government viewed housing as a social need and provided social housing for the poor. By 1983 it was evident that this policy had failed, which led to a reform between 1984-1994 which saw the setting up of a rental market for housing, plus a decision to sell public owned dwellings by providing large government subsidies to ease inflationary problems. This reform however failed because rents were still substantially low and also people could not afford to buy the houses despite the subsidized prices which had been set. Lizarralde and Root (2008) bring another dimension to low cost housing finance in South Africa - the effect of market inefficiency on the willingness of approved contractors to be Involved in low cost housing finance and delivery. Quoting from (Keivani and Werna 2001), they assert that the low cost housing market does not always perform efficiently as to guarantee the willingness of consumers to maximize their utility in a market transaction in a way guaranteeing suppliers to maximize their profits by responding to the demand. Their study established that high land values and restriction of informal contractors from low cost housing construction caused high prices of houses after completion. Page 19
NICMAR The same was noted by Mlinga and Wells (2002) in Tanzania. It is their suggestion therefore that the informal sector should not only be recognized but it should also be acknowledged that they already play an invaluable role in housing supply and their products. [8]
2.2.2. INDIA
Co-operatives in India were introduced by the British primarily to aid small-scale farmers and to improve access to rural credit. The first Co-operative Societies Act was adopted in 1904, which then only included credit co-operatives. The act was soon amended to grant the registration at the State level of non-credit co-operatives, including housing and its administration, allowing them to adapt the legislation to prioritize local needs, in the years 1912 and 1919 respectively. In tandem with cooperative societies, the co-operative housing movement started to develop at the beginning of the 20th century. Bangalore Building Co-operative Society, the first housing co-operative in India, was founded in 1909 in the State of Karnataka (former State of Mysore). In 1913, the State of Maharashtra (former State of Bombay) set up a non-official body, the Bombay Co-operative Housing Association, which did a pioneering job in propagating co-operative housing. Among many milestones, the association elaborated model by-laws which were used in the organisation of several housing co-operatives. It was also the first one to get the financial participation of the state in the affairs of the housing co-operatives. The political context and public environment continued to be supportive of the development of co-operatives by the time India emerged independent. In fact, the first Prime Minister of India, Jawaharlal Nehru, supported the growth of co-operatives as he visions them as ―a part of his paradigm of democratic socialism‖. However, the development of housing co-operatives remained marginal until the 1950s, mainly due to an inadequate organisational support structure and an unsupportive legislative and administrative framework. Initiatives were undertaken to provide housing for middle and low-income groups in the former states of Madras and Bombay. For example, in 1950 about 4,000 houses were built and 12,000 were under construction by 273 housing co-operatives in the State of Madras whereas in the State of Bombay, 3, 500 houses were built, 229 were under construction by 315 housing cooperatives. Page 20
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2.3 CONCEPTIONS AND MISCONCEPTIONS IN AFFORDABLE HOUSING RESEARCH AND PRACTICE Despite the current surge in the construction of housing environments, the quest for affordable housing remains elusive for a large segment of society. Descent, affordable housing is emerging as a critical issue toward the social and economic well being of the society. Demands for such housing continue to far outstrip supply and those projects that are currently built suffer from severe cost constraints, while lacking important qualities that relate to people needs and cultural aspirations. While recently there have been notable developments in housing design that demonstrate our increased understanding of social issues and construction techniques, cost efficiency is perceived as contradictory to the overall design quality and the lifestyles of potential users. There have been many explanations given. Most often it is first blamed on a lack of funding. However, another underlying reason may stem from the public perception of what affordable housing should look like. Some well designed projects make people uncomfortable because they are „too nice‟. “…The underlying belief is that people who do not have a lot of money do not deserve to live in nice housing”. This notion is a flaw since it is believed that quality design and meeting the preferences of users are critical to in still a sense of pride in potential occupants. “It must also bestow on its inhabitants a sense of dignity…To ignore this aspect of housing or to consider it a prerequisite for only those who can afford market-rate housing, is to invite both social and financial disaster. People need to have a personal psychological investment in their houses and are well aware when asked to live in impersonal housing. Unattractive housing directly affects the self-respect of the occupants. ―All people want to see themselves reflected, to express themselves on paper or canvass and in speech, dance, and their choice of car, clothing or built environment.". If people are consistently told, through the kinds of housing offered, that they are only worthy of a certain level of quality, they may come to believe it. Understanding preferences and the lifestyles of people gives architects and planners the chance to create a sense of individual expression and thereby a pride at an affordable cost.
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NICMAR The preceding discussion conveys that there are misconceptions in the conventional approach where affordable housing worldwide in general is always understood from the perspective of cost reduction only as one single determinant, while other critical determinants such as the lifestyles of the targeted populations, their satisfaction of their current houses, and their preferences of the future houses need to be addressed. This, in essence, requires an alternative approach that integrates these concerns in a comprehensive manner. [1]
2.4 NEED FOR COST EFFECTIVE LOW INCOME HOUSING Owning an asset, such as, a house protects the poor from the vicissitudes of life. It is one of the basic needs for most poor households and is important to ensure safety and health. For poor people who work out of their homes, such as micro-entrepreneurs, home improvement may have positive implications for income generation. As such, low-income housing is an area of interest for NGOs and financial institutions that serve the poor since not only is this an important need for the well-being of poor people, it is also something for which there is a clear willingness to pay for secure housing or land title. In India, the right to housing and adequate shelter is guaranteed in the Directive Principles of State Policy. Consequently, both central and state governments have an obligation to keep this provision in mind while formulating laws and policies. Until recently, the government had the tendency to view housing as a social problem, rather than as a developmental activity which could have tremendous trickle down effects for the economy. Yet, research shows there is possibility for much lucrative activity, as the consumer demand for housing is very high in the low income housing segment. India's housing shortage is estimated to be as high as 40 million units and demand from the low income segment constitutes a large proportion of this shortage. Other studies indicate that more than 200 million people are living in acutely poor housing conditions or on the streets. Such high demand heralds customized designs of housing finance products and supply mechanisms targeting low-income groups which have traditionally been excluded from the housing market due to land tenure and high investment requirements. In the recent past, several institutional efforts have been made to improve access to loan financing for these low-income households. In particular, shelter finance and Page 22
NICMAR community finance mechanisms have expanded considerably in the recent decades3. Notable examples of housing microfinance include the Self-Employed Women‘s Association (SEWA) Bank‘s efforts in Gujarat and the National Slum Dwellers Federation in Mumbai amongst others. These micro finance initiatives, typically comprised of small loans for housing improvements, are bolstered through close relationships with the community to encourage savings and discourage default. This is compatible with the pattern of low-income home building in which there are gradual improvements over time as the poor avail themselves of more opportunities to access finance through family, friends, local money lenders, and, in some cases, credit unions. Anyone who lives in urban India can attest to this reality. Slums and shantytowns typically have one room in which the entire household eats, sleeps and does everything in between. A typical 400-sq.-ft. home would contain a family of four, inlaws, and visiting cousins from the village who would sleep under the bed. "It is a global paradox,”. "The smaller the unit, the more people live in it. The larger the house, the fewer people it contains."[8]
2.5 FINANCIAL ASPECTS OF LOW COST HOUSING
2.5.1 DEMAND FOR LOW INCOME HOUSING FINANCE There is an enormous unmet demand for low-income housing finance. It is believed that the root cause of the shortage is the lack of housing finance options for lowincome households which account for over 90 percent of the housing need. In a market study of microfinance in three Mexican cities bordering the US, the effective demand for Housing Micro Finance ($122 million) amounted to five times that for micro-enterprise loans ($20 million)6. In India, micro-loans made by Micro Finance Institutions (MFIs) for entrepreneurial activities are habitually diverted by clients towards housing needs. Surveys of low-income households conducted in developing countries indicate that for these households, housing has a higher priority than education and health. A household‘s decision to invest in housing is influenced by its perception of housing. Theory leads us to think of low income housing from three vantage points:
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First, housing is most commonly thought of as Shelter: housing is a basic right, necessary for safety, health and dignity.
Second, housing can also be a Commodity: about 60% of a poor person‘s assets are represented by her/his home. The investment in housing can thus be a significant gauge of social and economic status for a poor person.
Third, housing is also an investment as is apparent in the case of home-based micro-enterprises. Home improvements provide the opportunity for higher productivity and thus, higher income. For instance, SEWA reports a 35% average increase in small enterprise weekly earnings as a result of the Parivartan slum upgrading programme.
However, as the Report on Housing Microfinance Initiatives conduced by Harvard University indicates, poor households will not spend more than 15% of their income on housing without some assurance of their ability to exercise authority as owners or renters. Thus, government policies must seek to increase security of land and home tenure if poor households are to be motivated to seek housing loans. Another aspect of low-income housing is the central importance of the neighbourhood which the beneficiary currently inhabits to her/his life and livelihood. Poor people in rural and urban areas prefer to make improvements to their existing house rather than move to a new unit. This preference ultimately underscores the importance of the economic and social networks which are rooted in their neighbourhood. For instance, in Ahmedabad, 110 beedi workers were allotted houses through a scheme involving SEWA, Ahmedabad Urban Development Authority (AUDA) and the Beedi Welfare Fund in 199310. The location of the houses was far from the centre of the city and from the original homes of the allotees. They were also far from the site of their occupations, which raised transportation costs. As a result, it is estimated that close to half of the homes have been rented out or sold by the original allotees11. Even in other AUDA schemes where homes are typically located close to employment opportunities, about 40% of the beneficiaries move back to their original neighbourhoods. These episodes reveal critical importance of neighbourhood ties to low-income livelihoods.
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FIGURE 2: SOURCE: KPMG
2.5.2 SUPPLY OF FINANCE FOR LOW INCOME HOUSING The supply of low income housing finance is constrained mainly because of banks‘ inability to accurately assess credit risk associated with low income borrowers, lower profit margins, lack of land titles, and uncertainty of repossession. While the penetration of traditional mortgage finance market in India is already miniscule, the penetration of low income housing is even smaller. In India, the mortgage to GDP ratio is estimated at 2%12. This mortgage to GDP ratio compares poorly to that of over 51% in USA and between 15-20% in South East Asian countries. The national government has control over legislation and resource allocation for housing finance; however, the enforcement of these rules falls under the jurisdiction of the state government which control suburban development, land-use regulation, and housing. Local governments enjoy a great deal of flexibility in terms of executing affordable housing interventions.
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NICMAR The two main public players in housing finance in India are the Housing and Urban Development Corporation (HUDCO) and the National Housing Board (NHB). HUDCO was created with the goal of servicing low- and middle-income households by financing infrastructure development and increasing credit options. Accordingly, HUDCO also provides loans to housing finance institutions which are then lent to lowincome households. NHB is the regulatory body for housing finance institutions and principally promotes housing finance institutions at regional levels. It also provides refinancing to the financial institutions that provide loans for low-income housing. Recently there has been discussion pertaining to the restructuring of state housing boards since funding from HUDCO often proves insufficient. The National Urban Renewal Mission (NURM) is a new initiative from the central government which provides grants to State housing boards to improve living conditions in a holistic manner for the urban poor.
FIGURE 3
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NICMAR 2.5.3 MODELS OF LOW INCOME HOUSING FINANCE This section will provide an overview of the different channels through which lowincome housing is currently provided in India. The government, both at the state and central level, continues to be an important player. Its influence in this sector is felt primarily in the form of some combination of grants and loans to various vulnerable sections of the population including but not limited to: Below Poverty Line (BPL) households, Scheduled Caste, and Scheduled Tribe households. Other innovative models for the provision of low-income housing finance include notable examples of MFIs; public-private partnerships involving NGOs, banks and financial institutions; and bottom-up community-based government programmes supporting housing loans for vulnerable .sections
2.5.4 GOVERNMENT PROGRAMMES Traditionally government interventions, both in India and abroad, take place through some combination of subsidies and new housing construction. Substantial subsidies, while fashionable with politicians and even poor households, are susceptible to corruption and nepotism, provide low per-unit coverage relative to demand and ultimately, and are financially unviable. Further, a housing policy that promotes expensive new housing is not in keeping with the realities of low-income housing which, as we saw earlier, is characterised by ‗progressive build.‘ Such policy arises not only from influential parties such as home finance institutions and land developers but also from a top-down approach towards low-income housing. This policy may also discount opportunities for micro finance, which unlike the top-down approach, is capable of being scaleable and sustainable if managed properly. In the Indian context, government sponsored programmes seemed poorly targeted and poorly funded relative to the demand. In urban areas alone, current funding covers less than 1 percent of the housing demand14. Further, Government of India (GOI) urban programmes have been allocated close to $130 million assistance per year in the Budget15. Assuming that GOI targets 40 million out of the total slum population of 60 million, every slum dweller receives $3 of assistance per year, emphasizing Ferguson‘s point that subsidies are insufficient to meet housing demand. The problem is even worse in urbanized areas than in rural ones, as Buckley et al. demonstrates. Comparing rural versus urban programmes, the research of Buckley et al. shows that Page 27
NICMAR rural subsidies are six times higher than urban subsidies, even though the ratio between rural and urban poor is three to one. Thus, on per capita basis, the rural poor get twice as much funding as the urban poor is three to one. Valmiki Ambedkar Awas Yojana and the National Slum Development Programme, subsidy-laden framework of financing of such programmes becomes apparent. Embedded in the statistics, the poor repayment performance is a hidden subsidy and consequently, these programmes incorporate subsidy rates of 80 to 90%. Such high rates of subsidy embodied in the form of grants, free land and loan defaults are present in rural schemes as well. More than anything else, what the government programmes have revealed is that a demand-driven process, informed by community participation, would lead to greater satisfaction with the end product and greater efficiency. Consequently, poor people would be more willing to pay for the product, which would in turn alleviate the appreciable monetary load on the state. The Kudumbashree‘s Bhavanashree programme in Kerala exemplifies this point. This discussion on government programmes is important because in some sense, it frames the environment within which any financing institution in the low income housing sector would have to function. The culture of subsidies is a challenge for providers of low-income housing finance such as MFIs. Given that they are important political tools to gain votes, they are difficult to do away with. At the same time, it may be possible for MFIs to use the subsidy to better leverage their products. For example, some government housing subsidies insist on the presence of a foundation prior to the disbursement of funds for the superstructure. MFIs could extend loans to build the foundation. Similarly, there exist subsidies to build sanitary toilets. When MFIs lend to beneficiaries, the latter can use home loans in conjunction with the subsidy for toilets, thus making more money available for the home itself.
2.5.5 HOUSING MICROFINANCE – DIFFERENT APPROACHES Housing microfinance (HMF) is often said to lie at the intersection between traditional mortgage finance and micro-enterprise finance. For instance, the amount and the tenure of the loan are typically much smaller and shorter in HMF than in traditional mortgage finance. What differentiates housing loans from income generation loans even within MFIs is that while traditional microfinance loans are unsecured, HMF loans generally require some kind of collateral, most typically a title,
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NICMAR be it legal or Para-legal. Table encapsulates some of the salient differences between micro enterprise loans and HMF.
2.5.6
CONSTRUCTION
SERVICES
AND
TECHNICAL
ASSISTANCE At first glance, providing technical assistance and supervision of the construction process yields many setbacks. It implies increased administrative costs and often, the MFI may not have the expertise to provide technical assistance regarding construction. As a result, these services would have to be outsourced, the cost of which ultimately get passed on to the consumer, making it more expensive for clients to borrow. However, such assistance has the potential to yield a broad array of benefits including the increased likelihood of completing construction through enhanced efficiency, lowered overall cost of construction through cheaper materials, and more robust construction through good quality materials. These benefits translate into increased likelihood of repayment. For those MFIs that do not possess technical expertise, partnerships with NGOs or private institutions, such as construction companies or material suppliers, provide a viable option. There has been evidence that these partnerships generate some positive outcomes. For example, FUNHAVI in Mexico has close relationships with the materials suppliers from whom it purchases at bulk prices. In turn, FUNHAVI sells these materials to clients at retail prices. In this manner, they ensure that the quality of the materials used is good, and in fact, make
Page 29
NICMAR 11% of their operating revenue. In addition, it may help the MFI to directly estimate finance requirements of their clients. This form of technical assistance is clearly encouraged in Daphnis (2004): If the MFI plans to offer no form of construction assistance, the housing microfinance loan is, in effect, a consumer loan whose declared purpose is housing but whose ultimate use is up to the client. The proposed construction project provides a rationale for estimating a required loan amount. For example, the Bhavanashree scheme in Kerala has observed cases where borrowers take an Rs.50, 000 loan and attempt to build a house costing Rs.100, 000. Not surprisingly, many borrowers are ultimately forced to discontinue the construction due to insufficiency of funds. These examples suggest that partnership with construction material suppliers and technical assistance can benefit both borrowers and MFIs through various channels, such as higher quality of materials used, a potential avenue for MFIs to gain profit, and lower default rate. It should be noted, however, that there are cases that do not support this view as evidenced by the case of Indian Association of Savings and Credit (IASC), in Tamil Nadu. Here, a course on cost-effective construction methods was offered to its housing loan clients. A survey conducted by IASC revealed that only 5% of clients who attended the class incorporated the course concepts of cost-effective methods into their actual building methods, and thus the class was discontinued29. There is also anecdotal evidence that homeowners who are in control of the home building process and decision making about the design, size and organising the building tend to be most satisfied with the end product and additionally, more willing to pay for it.[8]
2.6 LIFE STYLE THEORIES
2.6.1 INCORPORATING LIFE-STYLE THEORIES INTO A COMPREHENSIVE RESEARCH PROCESS Since the intention of this paper is to develop a new approach for investigating affordable housing, it is essential to redefine the nature, direction and orientation of knowledge about affordable housing to be more relevant to the socio-economic and cultural contexts. It is therefore proposed that adopting a trans-disciplinary thinking requires that trans-disciplinarily is viewed as a realm of research that differs from Page 30
NICMAR other forms of inquiry. Concomitantly, investigating affordable housing in a transitory fashion that crosses the boundaries between different disciplines is paramount. It is also envisioned that the unique characteristics that the kingdom enjoys in terms of economic, social, and cultural particularities necessitates a comprehensive mechanism that addresses the misconceptions, which characterize other conventional approaches of inquiry that rely heavily on knowledge types emerging from one single discipline. Thus, a number of perspectives is incorporated in a proposed alternative approach, derived from different disciplines while at the same time crosses the boundaries between them. Such an approach is based on introducing lifestyle theories.
2.6.2 LIFE STYLE THEORIES: PHILOSOPHY
The proposed approach involves the introduction of lifestyle theories into other concerns including financial, cost reduction, and affordability issues. Understanding how the issue of affordability may relate to people preferences and lifestyles mandates an understanding of lifestyle theories that emerged from other disciplines and branches of science such as ethnology, anthropology, and sociology. Ethnology is defined as “the science that analyzes and compares human cultures, as in social structure, language, religion, and technology”, while anthropology is defined as ―the scientific study of the origin, the behaviour, and the physical, social, and cultural development of humans.” [27]. It should be noted in this context that ethnology is also defined as a branch of anthropology that addresses cultural issues thereby is often referred to in the literature as ―cultural anthropology.‖ On the other hand, sociology is defined as ―The study of human social behaviour, especially the study of the origins, organization, institutions, and development of human society.‖ Sociology involves the analysis of a social institution or a societal segment as a selfcontained entity or in relation to society as a whole. the assemblage of buildings in a housing environment, land use patterns, and arteries of communication that constitute that environment as a place cannot emerge fully or formed out of Page 31
NICMAR nothingness, stop or grow rigid, or indelibly etched in the once-natural landscape; they represent a human product. In other words, such an environment is seen as a place that involves an appropriation and transformation of space and nature; processes that are inseparable from the reproduction and transformation of society. On the other hand, such views invigorate an understanding that the social aspects of everyday life can be seen as rich realm that offers valuable theoretical, epistemological, and substantive contribution to how affordable housing environments can be investigated. Three major theories appear to have influenced recent conceptions about lifestyles and human preferences. These are of the Danish ethnologist: Thomas Hojrup; the British anthropologist: Mary Douglas; and the French sociologist: Pierre Bourdieu.
Modes: Foundations of Life Mode Analysis (2003)‖. He argues that our values are constrained by cultural-relational dialectics and are Thomas Hojrup introduced the concept of life mode in his book ―State, Culture, and Lifeproduct of cultural life modes [31]. He attempted to address the problem that different cultural values conflict when they are brought together. The three life modes he introduced are: self-employed life mode, wage earner life mode, and career oriented life mode. The preceding classification shows that based on income level, work sector, and work style of an individual, house needs and preferences vary dramatically. Putting these three life modes into a house/home, or affordable housing perspective, one could relate them as follows: • The first mode is self-employed where means of production are owned and included within the house. Therefore, the house acts as both living and working place, and no separation between working time and space time. • The second mode is wage-earner where the house is either regarded as a primary place serving recreational purposes, or as a place where important spare-time activities are undertaken. • The third mode is career oriented where ideally the house reflects the personal progress in order to reflect position, social status, and past and recent experiences.
In 1996, Mary Douglas introduced a similar life style theory. Four different subcultures stem from this theory; these are: competition and individualism; isolation and avoidance of social controls; equity and negotiation; and hierarchical communities Page 32
NICMAR [32]. These sub-cultures relate directly to how affordable housing environments could be understood and investigated. Housing typology in terms of house size, house integration within the neighbourhood and community, and the overall house image are important elements when reflecting this theory on affordable housing. Pierre Bourdieu‘s theory corresponds with Douglas‘s theory since he introduced in 1984 three key concepts for understanding the concept of Lifestyle: these are: habits, position, and distinction. Habits refers to past experiences and embedded preferences as well as socio-behavioural practices. Position means what agents have in terms of different kinds of capital and he means by agents people and institutions. distinction involves being distinguished and being an individual. This understanding can be linked to affordable housing investigation, especially when developing mechanisms of inquiry about what housing environment people have experienced and what housing environment people would like to live-in in the future; inquiry about issues that reflect people past experiences and social practices and preferences of the future. It is apparent that the three theories are based on different set of interests under different lifestyles aspects. Therefore, Hojrup‘s theory can be labelled as a work-based theory; Douglas‘s theory can be labelled as attitude based theory, while Bourdieu‘s theory can be labelled as status based theory. All are conceived to dramatically influence the understanding of affordable housing in physical and social terms. Thus, they should be included in any inquiry aimed at knowledge production about affordable housing. Such understanding is illustrated in Figure. Introducing lifestyle theories can be viewed as an enabling mechanism for a deeper investigation of affordable housing. However, two additional concepts appear to be crucial when establishing a comprehensive investigatory process; these are: a) place attachment and b) home appropriation since they collectively represent a critical relationship between the physical characteristics of a housing unit (which needs to be seen from a ―home‖ perspective), the degree of satisfaction of the existing home environment, and the preference of the home and the overall residential environment of the future. The question that can be raised at this point is how lifestyle theories and their underlying concepts can be utilized in affordable housing research. The following section provides the answer in Page 33
NICMAR the form of a comprehensive framework that ultimately leads to designing a tool of investigation.
2.6.3 DESIGNING AND TESTING A TOOL FOR AFFORDABLE HOUSING RESEARCH: In light of the preceding crux of the argument, the three lifestyle theories, and the discussion of environmental psychology relevant literature, a framework for investigating affordable housing is conceptualized based on the fact that people current experiences and degree of satisfaction and people future needs and preferences should be integrated in a comprehensive investigatory mechanism. This is derived from the value of integrating lifestyle theories in a trans-disciplinary manner. The framework is structured in four clusters; each of which seeks out the development of a specific type of knowledge as illustrated in Figure. The four clusters of the framework can be outlined as follows:
FIGURE 4
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NICMAR Incorporating trans-disciplinary thinking into a comprehensive investigatory process of affordable housing: Lifestyle Theories
Framework for inquiry about affordable housing FIGURE 5
• Cluster (1): addresses personal information including gender and age. • Cluster (2): aims at developing knowledge about family that reflects different lifemodes among other issues. It includes issues that pertain to number of family members, educational level, work sector, income level, presence of domestic labour, and number of cars used by family members. • Cluster (3): investigates issues toward developing knowledge about current home that translates key concepts of understanding lifestyles including issues that pertain to appropriation and place attachment. Such issues are translated into a number of questions that involve home type, ownership status, space availability, and the degree of satisfaction. • Cluster (4): seeks out the development of knowledge about future home that reflects the
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NICMAR three life style theories. It includes issues related to future space needs, position within the community/neighbourhood, and home typological preferences. [1]
2.7 MATERIALS 2.7.1 TYPES OF BUILDING MATERIALS: The various building materials available can be divided into two types and they are:
2.7.1.1 TRADITIONAL MATERIALS: These materials serve the basic needs of the majority of the population. These have very useful properties; however, there is a scope to modify these through appropriate changes in the process of production as well as in the techniques of application, so that these are made structurally and functionally acceptable.
2.7.1.2 CONVENTIONAL MATERIALS: The conventional materials are those, which have been obtained by using the modern technologies and can be mentioned as fruit of research and adopted to indigenous requirements.
2.7.2 BRIEF DESCRIPTION OF FEW LOW COST BUILDING MATERIALS
2.7.2.1 IMPROVEMENT OF MUD: Mud is only a material available everywhere in abundance free of cost and is being used as building material from centuries. But such types of houses are temporary in nature, prone to erosion by heavy rains. The disadvantages of mud can be overcome by suitable improvement in design and construction techniques.
2.7.2.2 STABILIZATION: The strength of mud is improved by adding cement, lime, bitumen or fibres and it also becomes resistant to water, its main enemy. Cement stabilized mud blocks, using 3 to 10% cement by weight moulded in mechanical machines are better than adobe mud bricks.
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2.7.2.3 NON-ERODABLE MUD PLASTER: Central Building Research Institute, India has developed an economical but effective process to protect mud walls by applying non-erodable mud plaster. Non-erodable mud is prepared by mixing bitumen cutback (Bitumen & Kerosene oil mixture) with a specified mud plaster. Soil should consist of clay 20-25%, sand 40-45% and remaining part may be silt, peat, loam etc, but it should be free from organic matter. Bitumen of 80/100 grade penetration and kerosene oil are mixed in the proportion of 5:1 (by weight) for preparing cutback. 64 kg of cutback is required for one cubic metre of soil. Non-erodable mud plastered walls are resistant to water erosion.
2.7.2.4 TERRA-COTTA SKIN TO MUD WALLS: Centre for Science for Villages, Wardha, India has developed technique of providing potter made tile lining to mud-walls protecting them from rain and moisture. In place of potter made tiles, Kiln-fired brick or tiles may also be used to protect mud walls from rains. These tiles/bricks can be fixed with mud mortar & pointed with cement mortar.
2.7.2.5 IMPROVED THATCH ROOF: An effective treatment for rendering the thatch roof fire resistant and water repellent has been evolved by Central Building Research Institute. It involves plastering of thatch layers by the specified mud plasters. Top & bottom of the thatch roof is plastered with non-erodable mud plaster, which makes it durable & fire resistant too.
2.7.2.6 WARDHA TUMBLER TILES: These tumbler tiles are cast by potters and used as roofing. These have been developed by Centre for Science for Villages, Wardha. This kind of roof keeps the heat & cold out. These tiles require no under structure, yet can bear the weight up-to 1-0 tonne/m2. Life is about 50 years & requires no repairs. Being light in weight (135kg/m2), the roof is safe even in future earthquakes.
2.7.2.7 FERRO-CEMENT: Page 37
NICMAR Ferro-cement is a thin walled versatile high strength cement based composite material made of cement mortar reinforced with one or more layers of wire mesh closely bound together to create a stiff structure unit with high performance. The desired compressive strength of Ferro-cement is generally 25 N/mm2 at 28 days & mix ratio recommended is 1:2 to 1:2.5 ;(cement: coarse sand) and water/cement ratio should be 0.4 by weight. It can be used in the construction of pre cast toilet units, water tanks cycle sheds.
2.7.2.8 FLYASH-SAND LIME BRICKS: These are produced from fly ash and sand and lime used as binder. These bricks are cheap, and have good crushing strength.
2.7.2.9 CLAY FLYASH BURNT BRICKS: These are produced from fly ash and clay and are stronger than conventional clay bricks. These consume less energy, provide better thermal insulation and solve the problem of disposal of waste material fly ash & thus are environmental friendly.
2.7.2.10
SFLYASH
BASED
LIGHT
WEIGHT
AERATED
CONCRETE WALLING AND ROOFING BLOCKS: A process of mixing fly ash, quick lime/cement and gypsum, foaming agents such as aluminium powder, produces these. These are cheap and lightweight blocks mostly used for non-load bearing partition walls.
2.7.2.11 CEMENT BONDED FIBER ROOFING SHEETS: Cement bonded fibre roofing sheets are made by profitably utilizing coir waste coconut pith, wood wool etc., in combination with cement as binder for production of corrugated or plain roofing sheets. These sheets require less cement and so they are cheaper than other roofing sheets available in the market.
2.7.2.12 CLAY RED MUD BURNT BRICKS: These are produced from alumina red mud or bauxite, an industrial waste of aluminium producing plants in combination with clay. Page 38
NICMAR
2.7.2.13 GYPSUM BASED CEILING TILES, PANEL BLOCKS AND DOOR/WINDOW SHUTTERS: There
are
manufactured
from
calcined
gypsum
obtained
by
processing
phosphogypsum an industrial waste of fertilizer plants. The panels are strong, lightweight, resistant to fire and works as a thermal insulative and cost of the product is cheaper.
2.7.2.14 PRECAST STONE BLOCKS: These are of larger size than brick and are manufactured by using waste stone pieces of various sizes with lean concrete of 1:3:6 mix.
2.7.2.15 PRECAST HOLLOW CONCRETE BLOCKS: These are manufactured by using lean concrete mixes through block making machines. The cavity in blocks provide better thermal protection and these also do not need external or internal plastering.
2.7.2.16 PRECAST RCC DOOR AND WINDOW FRAMES: These are cheaper, stronger fire resistant, termite resistant and sustain temperature & humidity.
2.7.2.17 PRECAST PLANK AND JOIST FLOORING/ROOFING: These are precast RC planks, supported over precast RCC joists. Cost saving is up to 20% and time saving in construction is up to 12%.
2.7.2.18 HALO-PAN SYSTEM: The halo-pan system can be used only in six standard pre fabricated components and they are • Wall • Roofing/floors Page 39
NICMAR • Door/window • Collar units • Parapet units • Partially precast beams Overall cost of hollow pan system is less and speed of construction is more. A flat can be constructed in 1.5 days time. They are useful for post earthquake reconstruction phase. One crane is required to lay the prefabricated panels at respective positions.
2.7.2.19 RICE HUSK AS BUILDING MATERIAL: India alone produces about 20 million tones of rice husk annually. Rice husk ash has been found to be a useful building material. It can be mixed with cement up to 20% without affecting strength and thus cost of construction can be reduced and problem of disposal of this ash can also be solved by using it. [9]
2.8 SUMMARY: The following things are concluded after referring to the literature review:
2.8.1 FINANCIAL ASPECT: Financial and regulatory constraints have plagued the housing sector in India. Current financing mechanism prevalent in the country mostly targets MIG and HIG sections of the society while the households falling under LIG and EWS category find it difficult to secure formal housing finance. Commercial banks and traditional means of housing finance typically do not serve low-income groups, whose income may be vary with crop seasons, or is below the ‗viable‘ threshold to ensure repayment, or who cannot provide collateral for loans. Microfinance institutions are considered to be the next best alternative to for financing the EWS and LIG category. However, there are challenges faced by microfinance institutions which prevent them from extending housing loans. Challenges faced are primarily due to the longer period of housing loans (typically between five to seven years minimum, if not more) and due to the larger amount of loan compared to typical loans extended by MFs. Typically, a house, particularly in the urban areas, will be about INR 1 lakh, whereas when microfinance Page 40
NICMAR institutions give for livelihood financing, they give INR 10,000 to maximum INR 35,000. If they have to lend to a significant numbers of people, the amount to be loaned goes into crores of rupees which can be a problem for microfinance institutions. Another problem with microfinance institutions is of refinance. While National Housing Bank (NHB) provides refinancing facility, interest rates are not fixed but reviewed periodically. Lack of developed debt market places considerable challenges for microfinance companies depriving them of long-term affordable money and what they currently have is a maximum of three to four year money available at a cost of 15-17 percent, making it difficult to lend for mortgages. Even if they are willing, the rate will be some 18-19 percent, which, while it may be way cheaper than what a moneylender would ask for, doesn‘t really help the cause. According to CREDAI, real estate also faces multiplicity of taxes at different points of housing transactions and average to a little over 25 percent of the property rate.
2.8.2 LIFE STYLE THEORIES: It is clearly evident that a new paradigm of thinking is emerging where no one theory or discipline would have the upper hand in developing a comprehensive understanding of affordable housing. In the old paradigm, the value of affordable housing is assumed to be in the quantifiable attributes of dwellings and their related cost, while in the new paradigm affordable housing inquiry can be viewed within relationships between the process, the product, and the socio-cultural aspects of the targeted populations. Simply, the old paradigm views affordable housing in terms of what it is, rather than what it does for the local populations and the way in which they perceive their current environment and aspire to environments more responsive to their social needs and lifestyles.
2.8.3 MATERIALS In case of rural areas, the houses can be constructed by using traditional and locally available raw materials of bamboo, cane, reeds, rattans, willow, timber and leaves of some particular trees, and has been designed to suit the traditional living habits of local people and maintain their socio-cultural heritage. Further there has been a growing feeling amongst the rural peoples that the old bamboo-thatch or leaf houses may be constructed with newer materials of RCC, precast-components etc., using
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NICMAR better engineering information and thereby, achieving more durability as well as extra living comfort in the process. Under these growing innovative concept, concrete blocks, cement, wooden frames, and tiles that are locally made are most useful and thereby encouraging many small-scale enterprises in the process. Although there seems to be a strong emphasis on the use of local resources in present day relief aid, the important issue is not just the use of local resources, but how local manpower can be created. In most developing countries, the challenge is to organize and initiate measures that promote talent building.
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NICMAR
CHAPTER 3 3. DEFINING LOW COST HOUSING:
3.1
URBANISATION
DEMAND
DRIVER
FOR
ALL
AFFORDABLE HOUSING IN INDIA The process of urbanisation in India is marked by an increased concentration of economic activity in urban centres. Nearly 79 % of the new jobs totalling 19.3 million between 1991 and 2001 were generated in urban areas and only five million were generated in rural areas. This has resulted in mass influx of population into the urban centres. Furthermore 68.7 % of the total urban population was living in class 1 cities (defined as cities with population of over 100,000) in 2001. In contrast the shares of medium and small towns in the total population stood at 21.9 % and 9.4 % respectively. Around 50 % of India‘s population is expected to reside in urban areas by 2041. The rising urban population would continue to exert significant pressure on the available housing stock in the urban area particularly in the lower and middle income segments. The high rate of urbanisation and the rapid movement of LIG an MIG population to EY-ICR A and EY-ICR B cities has triggered the demand for affordable houses.
3.2 AFFORDABLE HOUSING-TIME TO DEFINE IT Defining affordable housing continues to be a challenge for the industry practitioners in India. While some define it as having the characteristics of LIG housing, there are others who tend to club it with MIG group of housing. By and large the criteria for defining affordable housing include size of the units, location, land cost, government policies and income levels of the target consumers. In many developed countries such as US, a commonly accepted guideline for housing affordability is housing whose cost does not exceed 30% of a household gross income. Internationally, the definition is based on the value of the house. For example, the case of Malaysia, low cost housing is defined at a ceiling price of MYR
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NICMAR 25,000 per unit or less, which can only be sold to house holds with monthly income between MYR 500 to MYR 750. The analysis of the income levels of a wide range of salaried professionals from varied industry verticals showed that the distribution of income had a very high degree of variance. There is a widening gap between the income levels of the target consumers for LIG and MIG housing. This, in turn, has resulted in a disproportionate gap between the price points of the MIG and LIG housing. In light of the above mentioned gap the fact that the middle income group tends to constitute a major segment of the class of salaried professionals, we believe that there should be a defined product between a typical MIG and LIG classification of houses. It is believed that affordable housing in the current scenario can be referred to a housing product meeting the requirement of the population falling between the MIG and LIG category.
3.3 SUPPLY SIDE (DEVELOPERS) VIEW To gain insights on supply side perspective on potential price points for providing affordable housing. Ernst and young has obtained views from more than 100 developers and institutional investors in India.
Opinion of cost for affordable housing 1.5-2.5 million above 2.5 million 1-1.5 million
0.5-1 million
FIGURE 6
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NICMAR Contrary to the prevalent practice of using EWS and affordable housing interchangeably: 36 % of the total developers interviewed were of the opinion that in the current market scenario, the affordable housing should price between INR 1 million to INR 1.5 million. Another 34 % were of the view that the price band for affordable houses in India should range between INR 1.5 million and INR 2.5 million. Interestingly, only 20 % of the developers believed that houses less than INR 0.5-1.0 million should be classified as affordable housing. Further, a number of developers were of the opinion that there has to be differentiation between low cost EWS housing and affordable housing. To summarize almost 70 % of the developers interviewed believed that depending on the location, cities, product offering Etc. The price of affordable housing should range between INR 1 - 2.5 million. Having understood the realistic price points attached to affordable housing by Indian developers, it is also important to understand the demand side for the same.
3.4 DEMAND SIDE (CONSUMER POINT OF VIEW) To understand whether the price points which are given by the developers are in line with the affordability of typical LIG/MIG categories of end consumers. An attempt has been made to estimate achievable price points of such consumers based on their income levels.
3.4.1 METHODOLOGY FOLLOWED 1) The methodology is primarily based on estimation of the affordability levels for buying a house of various professional groups based on their income levels. 2) The two inputs for the estimation that is the income levels and the professional groups has been taken from the recent report ‗ India salary handbook for India-2011‘ of Kelly services, a reputed hr multinational. 3) We have considered the salaried professionals from 5 industry verticals. 4) The minimum salary drawn has been considered. 5) We have divided the respective sections in three groups based on the count of the sample.
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NICMAR 6) The repayment period is assumed at 10 years and interest rate of 11 percent per annum.
3.4.2 SCOPE AND LIMITATIONS 1) The analysis is based on a group of professionals form five industry verticals. 2) The sample has not been extrapolated with any coefficient to cover the population. So the results depict the behaviour of the sample. 3) We have considered individual income levels from the demand side. So the result does not take into consideration the impact of double income behaviour from the households on the demand for the affordable dwelling units. 4) The analysis does not include variables such as rate of interest, tax incentives by government and land costs, which can affect the supply and demand side behaviour.
EMI affordability as
Group 1: Low
Group 2: Medium
Group 3: High
Income Group
Income Group
Income Group
35%
45 %
50%
a percentage of the income
ANALYSIS The analysis given below is based on Income groups divided according to the KPMG analysis done in 2010. Also the amount of loan is calculated through the loan calculator (http://www.rupeetalk.com).
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NICMAR
Figure7: Loan Affordability calculator
Industry 1: Education Groups
Minimum
EMI(INR)
monthly
Amount of
Value of the
loan(INR)
dwelling
Income(INR)
unit(INR)
Group 1
17,500
6125
4,44,646
5,23,113
Group 2
54,167
24,375
17,69,510
20,81,777
Group 3
108,333
54,167
39,32,268
46,26,198
Amount of
Value of the
loan(INR)
dwelling
Industry 2: Engineering Groups
Minimum
EMI(INR)
monthly Income(INR)
unit(INR)
Group 1
25000
8750
6,35,209
Group 2
70,833
31,875
23,13,974
Group 3
125,000
62,500
45,37,205
747,305 2722322 5337888
Industry3: FMCG Groups
Minimum
EMI(INR)
monthly
Amount of
Value of the
loan(INR)
dwelling
Income(INR) Group 1
12500
unit(INR) 4375
3,17,604
373,651.8 Page 47
NICMAR Group 2
41,667
18,750
13,61,161
Group 3
125,000
62,500
45,37,205
1601366 5337888
Industry 4: IT Industry Groups
Minimum
EMI(INR)
monthly
Amount of
Value of the
loan(INR)
dwelling
Income(INR)
unit(INR)
Group 1
20,833
7292
5,29,365
Group 2
33,333
15000
10,88,929
Group 3
83,333
41,667
30,24,827
622782.4 1281093 3558620
Industry 5: MEDIA Groups
Minimum
EMI(INR)
monthly
Amount of
Value of the
loan(INR)
dwelling
Income(INR)
unit(INR)
Group 1
16,667
5,833
4,23,448
Group 2
41,667
18,750
13,61,161
Group 3
1,16,667
58,333
42,34,700
498174.1 1601366 4982000
As affordable housing is related to Low income groups and medium income groups the following analysis has considered only these two groups. Data shows that the minimum cost of the dwelling for group 1 is Rs 373651.8 (Industry 3) and the maximum cost of the dwelling is Rs 747,305 (Industry 2). Whereas the minimum cost of the dwelling for group 2 is Rs. 1,281,093 (Industry 4) whereas the maximum cost goes up to Rs 2722322. That is the range of the dwelling for group 1 and group 2 are between Rs 373651.8 to Rs 2722322. The developers have given the range of INR 1 2.5 million. There is a variation in values given by the supplier side and the consumer side. Based on the above study it is inferred that the range of affordable housing lies between Rs 3.5 lakhs to Rs 27 lakhs. This is based on the limited sample set, comprising of limited number of industries. Also the effect of double income in a family, government policies and interest rate fluctuations are not considered in the study. But a more refined conclusion can be taken out of the study:
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NICMAR 3
Affordable housing depends upon the income generated by an individual or a household.
4
Meaning of affordable housing varies from individual to individual and on the segment (group) he belongs to. For example affordable housing for low income group personnel will be different than a person belonging to medium income group.
5
Affordable housing is dependent upon the requirement of the individual and his household and his ability for affording it.
The above three conclusions give a more refined definition of affordable housing.
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NICMAR CHAPTER 4 4.0 FINANCIAL MODEL Numerous challenges face urban slum upgrading, including granting land tenure rights to slum households; alignment of landholdings for ease of movement and provision of network services and community facilities; reclamation of part of the habitation for alternative developments, in some cases; and, facilitating the households to access shelter loans for upgrading or the dwellings. Although each of the issues is important for sustainable slum upgrading efforts, this study focuses, as noted, primarily on issues relating to the last issue above: low income housing finance. This section provides a case study of alternative affordability models for funding housing with various combinations of shelter loans and subsidy funds. The analysis uses data assembled for a slum upgrading project in Nagpur that is being undertaken by the Nagpur Municipal Authority with the assistance of SEWA and CHF.1 The data include individual household incomes, which have been aggregated into quintiles for use in the affordability analysis.
The financing plan for households participating in slum upgrading should be based on an assessment of the following: Household affordability: the ability to mobilize the capital from own sources including stock of savings, sale of jewellery and household assets, and borrowings (often interest free) from employers, friends and relatives; The loan absorption capacity of borrowers in terms of ability to service a shelter loan; The creditworthiness of the households from the perspective of financing institutions – banks, housing finance companies (HFCs) and micro finance institutions (MFIs); The implications of lenders‘ risk perception on their willingness to lend and the terms of the lending; and The manner in which public subsidy funds (or other funds) are used to fill the gap between dwelling cost and household‘s ability to mobilize resources, including borrowing.
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NICMAR The assessment of alternative models for housing finance in slum upgrading presented here is based on analysis of data for 6,322 slum households in Nagpur, living in temporary and semi-permanent dwellings in 16 slum settlements in the city. The Nagpur Municipal Corporation (NMC) has prepared a Detailed Project Report (DPR) for upgrading these 16 slum settlements by providing new dwellings on the same site to these 6,322 households along with basic urban services. In Nagpur city, 37.5 percent of the people live in slums according to 2001 Census. The 30,108 slum households are spread over 427 settlements, of which 292 are notified slums, and 81.6 percent of the households live in temporary and semi-permanent dwellings.
4.1
COSTS
OF
SLUM
UPGRADING
AND
HOUSEHOLD
AFFORDABILITY ANALYSIS: The Nagpur Municipal Corporation has prepared 7 prototypes of new dwellings to be constructed at the existing site for the slum households. The built up area of the dwellings ranges from 24 to 36 m2, with costs between Rs. 113,000 and Rs. 154,000. On average, the dwelling size is 25 m2 and the unit cost is Rs. 141,967. The dwellings are to be constructed as row housing and are single or double-storey structures. The project will be executed by private sector construction companies, with a cost of construction for a 25 m2 dwelling for slum households of approximately Rs.142, 000. This cost is adequate in urban centres in India such as Nagpur, since the costs do not include land; the cost of construction does not vary greatly across cities in the country (not nearly as much as the cost of the land). As would be expected, studies in India have confirmed that slum households have substantially lower median income levels than the median for the city in which they live. However, income levels vary considerably across cities and within the slums in each city. Illustrative examples come from collaborative policy research by the Society for Development Studies (SDS) and the World Bank, in a project entitled Information-Based Strategies for Urban Management. As part of the policy research, an extensive ward level database based on household surveys was developed for Bangalore, Bhopal, Jaipur and Pune. The data in table show that the median income level of slum households is substantially lower than the city average (varying between 17.1 percent of the city average in Jaipur and 77.9 percent in Pune) and varies widely across these cities. In the examples that follow in sections 3.2 and 3.3, the resource mobilization capacity of Page 51
NICMAR households for upgrading or new dwellings is variously assessed for three hypothetical scenarios: Scenario I - households having access to home loans at current lending terms for the formal mortgage sector: 11%, an ―ideal‖ situation, but not likely. Scenario II - households having access to home loans though a financial intermediary in the form of NGO, cooperative or MFI in partnership with a bank at an interest rate of 14% and a term of 3 or 5 years: a more likely situation. Thus, it is assumed that financial intermediation impacts the resource mobilization capacity of households through higher loan costs via higher interest rate and a shorter repayment period. Scenario III - households having access to home loans through a financial intermediary at more realistic lending terms for low income households – 17% interest and a term of 3 years: also more likely.
Figure8: Loan Mobilization Capacity Of Slum Households For New Dwellings
The financial institutions in India, as elsewhere, have been apprehensive about launching direct lending operations with slum households. Discussions with housing lenders in India confirm that the small loan size and large number of accounts would raise their costs of loan management, and that the operations with numerous slum households might not be viable. Thus, the lenders are keen to have an intermediary – an MFI, NGO, or cooperative – to undertake loan origination, delivery, and collection. This, using Scenarios II and III, figure8 illustrates affordability for slum households in Bangalore, Bhopal Pune, and Jaipur Households in the first three cities have a reasonable capacity to service a shelter loan for a dwelling costing Rs. 142,000. As noted, Scenario II assumes an annual rate of interest of 14 percent, a loan
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NICMAR term of 60 months and Equal Monthly Instalments (EMI) of 30 percent of monthly household income. Under this Scenario, slum households have the capacity to mobilize a home loan equivalent to 56.6 percent to 97.4 percent of the (assumed) dwelling cost in three of the cities. Slum households in Jaipur, however, have the ability to mobilize only 14.5 percent of the cost. This financial intermediation, however, would clearly have higher cost implications for the borrowers, for example, in terms of higher interest rates and, possibly, shorter loan terms. Thus, an alternative loan structure is presented as Scenario III in figure8. The interest rate has been increased by 3 percentage points to 17 percent and the term reduced from 5 to 3 years. Even with these changes, slum households in Bangalore, Bhopal and Pune have reasonable affordability for servicing a loan covering 46.5 percent to 80.0 percent of the dwelling cost.
4.3 NAGPUR AFFORDABILITY ANALYSIS: HOUSING LOANS AND SUBSIDIES FOR SLUM UPGRADING IN NAGPUR: The Nagpur Municipal Corporation has assumed that the households participating in the slum upgrading project have limited affordability for new or improved dwellings. Thus, a limited number of slum households are being provided with a subsidy equalling 88 percent of the dwelling cost and are being facilitated to access a housing loan to meet their own contribution of Rs. 17,000 towards the cost of dwelling unit (Rs. 142,000). The total cost of construction of 6,322 rehabilitation units is estimated at Rs. 897.8 million, with a subsidy component of Rs. 790.0 million and household contribution (home loans) of Rs. 107.8 million. As indicated in figure9, the Nagpur slum households participating in the project, with median income of Rs. 2,000 per month would have to service a loan of Rs. 17,000 at the current market lending terms for housing finance lenders. Scenario I assumes an annual interest rate of 11 per cent and loan term of 60 months; the EMI for the loan would be Rs. 371, which is 18.6 percent of the median monthly income for the Nagpur households – well within the accepted norm of 30 percent. Analysis of household affordability for each quintile also supports the finding that the households have the ability to service the loan of Rs. 17,000 on these ―ideal‖ terms.
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NICMAR The EMI as percentage of median monthly income varies between 9.8 for households in Quintile V (relatively better off group) and 30.9 percent in Quintile I (the relatively poor group). However, as noted, although the financial institutions may accept that the project participants have adequate loan absorption capacity, they are apprehensive of launching direct lending operations and would like to have an intermediary: a cooperative, NGO, or MFI. This financial intermediation would have cost implications for the borrowers in terms of a higher interest rate and shorter loan term; thus the interest rate in Scenario II is expected to rise by at least 3 percentage points to 14 percent per annum and the loan term may fall to 3years. The repayment of higher EMI of Rs. 582 would still be affordable for households in Quintile III where the EMI would account for 29.1 percent of the monthly income, and clearly to the higher income groups. Affordability suffers, however, for the lower income groups. Thus, while the loan in Scenario II would be beyond the repayment capacity of households in Quintiles I and II, the EMI would be affordable for Quintile III, IV and V households.
Figure9: Nagpur Slum Households‘ Affordability Analysis
4.4 EQUITY CONCERNS AND LEVERAGING SUBSIDY FUNDS IN NAGPUR: As noted, the Nagpur Slum Upgrading Project covers only 6,322 households out of a total of 24,579 households living in temporary or semi-permanent dwellings and only Page 54
NICMAR 16 slums settlements out of 427 slum pockets in the city. This raises an important issue: equity concerns for applying all subsidy funds to only a few households versus spreading the subsidy across all households in Nagpur. In addition, given the differential affordability capacity for housing loans, it should be possible to better leverage the subsidy funds. In sum, two key issues are: Equity: the provision of highly subsidized new dwellings (covering 88 percent of the cost) to only one-fourth of the slum families in Nagpur raises equity concerns, since a significant proportion of the households not covered by the Project do not have the affordability to upgrade their dwellings without access to subsidy (as well as housing loans); and Leveraging household resources using the subsidy funds: the resource mobilization potential of households participating in the project, from own sources and home loan, is not being fully harnessed since a uniform subsidy is being provided to all households.
The potential for citywide coverage of slum households under the Project and provision of differential subsidy based on household affordability is examined below.
4.5 SIMULATIONS OF THE RESOURCE MOBILIZATION CAPACITY OF HOUSEHOLDS: In Scenario I (the ―ideal‖ situation), shown in figure 10, cost of loan is assumed to be 11 percent; the loan-to value ratio (LTV) may vary between 50 and 70 percent, the loan repayment capacity (EMI) is between 25 to 35 percent of monthly income; and loan terms of 3, 5, and 7 years are utilized. The figure 10 shows the amount of resources that the median income household could afford under these various terms. However, in the more likely situations, in contrast, Scenarios II and III, the cost of loan would be substantially higher in order to cover the assumed risk and the operations cost of a financial intermediary. The interest rate assumed to be 14 or 17 percent, and the loan term is 3 years, due to the more limited capacity of intermediary to manage relatively longer term loans. The LTV is likely to be 50 percent and monthly loan repayment ability may be assumed to be between 15 – 25 percent of the
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NICMAR household income. The resource mobilization capacity of slum households in these hypothetical scenarios is presented in figure11
Figure 10: Household Resource Mobilization Capacities For Median Income Households Under ―Ideal Market‖ Terms (Rs.)
Figure 11: Households‘ Resource Mobilization Capacity: More Likely Situations (Rs.)
4.6 PROJECT CROSS-SUBSIDIZATION AND LOWER COST APPROACHES TO CONSTRUCTION The affordability assessment of slum households in Nagpur shows that without any subsidy they do not have the resource mobilization capacity for a new dwelling (and would at best be able to undertake upgrading of their existing dwellings if provided with access to a housing loan). Thus, access to new dwellings by these households is highly dependent on subsidy support, and a case can be made for approaches that
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NICMAR provide support for more households – e.g. a wider distribution of the total subsidy funds of Rs. 790 million available to the NMC, rather than restricting the distribution to 16 slum settlements. The possibilities of project-level cross subsidization by higher income to lower income households should be explored. The households in Quintiles IV and V might receive a lower subsidy amount or be charged a higher interest rate to subsidize the interest rate charged for households in Quintile I and II. In addition, various lower cost approaches to construction can greatly assist with affordability. On-site New Dwellings – Cross Subsidization by Subsidy. One approach in a subsidized development program would be to use subsidy funds to leverage household resources to achieve higher program coverage. As has been discussed, the NMC is planning to provide a uniform subsidy of Rs. 124,931 per dwelling unit to be constructed in 16 settlements under the slum upgrading project, without taking into consideration the variation in resource mobilization capacity of households across income groups. However, a differential subsidy approach is feasible. The subsidy requirement for a citywide coverage of the slum upgrading project with differential unit subsidy by income groups is estimated at Rs. 2,646 million. The approach would help NMC to achieve its objective of providing new dwellings measuring 250 sq. ft. to slum households with lower per unit subsidy of Rs. 113,919.
Figure 12: Differential Subsidy Model for Citywide Contractor-driven Slum Upgrading in Nagpur
4.7 COST-SAVING MODELS IN SLUM UPGRADING: Alternative modes of cutting costs should also be explored. The examples below use the Nagpur data to look at a community construction approach, using land a resource as is done in Mumbai slum upgrading projects, and assuming that households only upgrade their units rather than obtaining new housing. Page 57
NICMAR
4.7.1 ON-SITE NEW DWELLINGS – COMMUNITY-DRIVEN PROJECT. NMC is planning to provide slum rehabilitation tenements in single and double-storey structures and the project is to be executed by private contractors. The contractors have estimated the cost of construction of slum tenements at Rs. 600 per sq. ft. However, if the households and community groups were to take up the responsibility of constructing the new dwellings themselves, the cost of construction could be reduced to Rs. 350 per sq. ft. and the unit cost would be as low as Rs. 87,500 per dwelling. The subsidy requirement for a citywide coverage of the community-driven slum upgrading project, with differential unit subsidy by income groups, is estimated at Rs. 1,307 million (figure 13). The approach would help NMC to achieve its objective of providing new dwellings measuring 250 sq. ft. to slum households with lower per unit subsidy of Rs. 59,452.
Figure 13: Subsidy Required for Citywide Community-driven Slum Upgrading in Nagpur 4.7.2 USING LAND AS A RESOURCE. The slum upgrading could be financed by making intensive use of land under slum habitation and using it as a resource for providing new dwellings to the slum households (Mumbai Slum Rehabilitation model). The builders implementing the project may be given incentive FSI (Floor Space Index) to construct free-sale tenements and cover the cost of providing affordable dwellings to the slum households. In Mumbai, builders implementing slum rehabilitation projects are able to fully cover the construction cost of slum tenements with the incentive FSI and the rehabilitation tenements are provided free of cost to slum households. In view of the relatively lower land prices in Nagpur compared to Mumbai, Page 58
NICMAR the builders may not be able to fully cover the cost of rehabilitation tenements with the incentive FSI and the beneficiaries would have to contribute to meet the shortfall from own sources and home loan. In certain locations where the land prices are very low and the contribution of builders and households is not able to fully cover the cost of rehabilitation units, there is the case for subsidy support on differential basis across income groups based on household affordability.
4.7.3 UPGRADING ONLY APPROACH. As noted, the affordability analysis of Nagpur slum households shows that they do not have the ability to pay for new units without subsidy. However, in the absence of subsidy support, the slum households may be facilitated by NMC to upgrade their existing dwellings. The three complimentary components that should be provided by the municipal authorities for a facilitating package for a household-led upgrading project are: - Access to a housing loan for upgrading; - Land-titling for tenure security; and - Provision of basic urban services. In this example, the households‘ affordability for upgrading has been assessed at Rs. 28,048 per unit and the total outlay on upgrading all slum tenements in the city is estimated at Rs. 843.8 million (figure 14). The households‘ resource mobilization plans include home loan equivalent to 50 percent of the upgrade cost.
The NMC would need to facilitate flow of home loan of Rs. 421.9 million for citywide slum upgrading efforts and this may be feasible only with financial intermediation of an NGO, cooperative, or MFI.
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NICMAR Figure 14: Home Loan Required for Citywide Upgrading of Slum Tenements in Nagpur The other complimentary inputs to home loan facility should be provision of urban basic services in the slum habitations, including water, waste management services, street pavements and street-lighting, among others, and security of tenure. While the former is the core responsibility of NMC and would largely contribute to improvement of quality of life in the habitations, latter would encourage the households to invest in home improvement and lenders to provide home loan to households.
4.8 SUMMARY OF FINANCING FOR ALTERNATIVE SLUM UPGRADING PLANS. Slum households are not uniformly extremely poor; many have sufficient income to afford modest housing loans. The use of subsidy funds in only 16 habitations in Nagpur rather than coverage of all the 427 habitations introduce citywide inequities and limits leveraging of household resources using subsidy funds. Households with no subsidy support cannot afford new dwellings and the maximum affordable loans can cover only cost of house upgrade.
Figure 15: Financing Plan for Alternative Slum Upgrading Models
Household community driven approach to construction of new dwellings is cost effective and would require fewer subsidies. Project design with community-driven construction of new units and differential unit subsidy based on household affordability across income groups would help leverage higher amount of local resources. With an increase in subsidy by less than twice the amount planned presently under the Nagpur Project, coverage would increase four times and include Page 60
NICMAR all slum households in the city. Figure 15 summarizes the total cost – for subsidies and housing loans - of the various options.
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NICMAR CHAPTER 5 5.0 HUMAN BEHAVIOUR TOWARDS LOW COST HOUSING:
5.1 BUYING DECISION PROCESS 5.1.1 INTRODUCTION: In easier terms, marketers could understand consumers well through the daily experience of selling to them. But as firms and markets have grown in size, many marketing decision-makers have lost direct contact with their consumers. Most marketers have to turn to customer research. They are spending more money than ever to study consumers, trying to learn more about consumer behavior. Who buys? How do they buy? Where do they buy? When do they buy? Why do they buy?
5.1.2 DECISION MAKING AS PROBLEM SOLVING: Consumers are complex and constantly changing. Not only is it difficult to what marketing program will work, but also what worked yesterday may not work today. Thus marketers must constantly improve their understanding of the consumers. The consumer buying decision process has six stages –
Need recognition
Choice of involvement level
Identification of alternatives
Evaluation of alternatives
Purchase and relative decisions
Post purchase behavior
The four primary forces that influence each stage are1. Social and group forces 2. Psychological forces 3. Information
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NICMAR 4. Situational factors
5.2 RECOGNITION OF AN USATISFIED NEED: Everyone has unsatisfied need and wants that create tension or discomfort. Acquiring and consuming goods and services need can satisfy some. Thus, the process of deciding what to buy begins when a need that can be satisfied through consumption becomes strong enough to motivate a person. This need recognition may arise internally, or the need may be dormant until it is aroused by an external stimulus such as an ad or the site sight of the product. The decision can also be triggered by the depiction of an existing product or dissatisfaction with a product currently being used.
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NICMAR 5.3 CHOICE OF AN INVOLVEMENT LEVEL: After recognizing the need, the consumer consciously or unconsciously decides how much effort to exert in satisfying it. Sometimes when a need arises a consumer is dissatisfied with the quantity or quality of information about the purchase situation and decides to actively collect and evaluate more. These are high involvement purchases that entail all six stages of the buying decision process. If on the other hand a consumer is comfortable with the information and alternatives readily available, the purchase situation is low involvement. In such cases the buyer will likely skip directly from need recognition to a decision, ignoring the stages in between. Some differences in consumer behavior in high and low involvement situations are:
BEHAVIOR
HIGH INVOLVEMENT
LOW INVOLVEMENT
Time invested
Large involvement
Small amount
Information search
Active
Little or none
Response to information
Critically evaluate
Ignore or accept without evaluation
Brand evaluations
Clear and distinct
Likelihood of brand loyalty Strong
Vague and general Weak
developing
Though it is risky to generalize since consumers are different, involvement tends to be greater under any of the following conditions:
The consumer lacks information about alternatives for satisfying the need.
A large amount of money is involved.
The product has considerable social importance.
The product is seen as having a potential for providing significant benefits.
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NICMAR Since they rarely meet any of these conditions, most buying decisions for relatively low priced products that have close substitutes would be low involvement. Hence involvement must be viewed from the perspective of the consumer, not the product. Impulse buying, or purchasing with little or no advantage planning, is a form of low involvement decision making. For this greater emphasis has to be given on promotional programs such as reduced prices on selected items to get shoppers into a store. Also, displays and packages have to be made appealing, since they serve as silent sales people.
5.4 IDENTIFICATION OF ALTERNATIVES: Once a need has been recognized and the level of involvement is selected, the consumer must identify the alternatives capable of satisfying the need. First, alternative products and then alternative brands are identified. Product and brand identification may range from a simple memory scan of previous experiences to an extensive external search. The search for alternatives is influenced by:
How much information the consumer already has from past experiences and other sources.
The consumers‘ confidence in that information.
The expected value of additional information or, put another way, what the additional information is worth in terms of the time and money costs to get it.
5.5 EVALUATION OF ALTERNATIVES: Once the reasonable alternatives have been identified, the consumer must evaluate them before making a decision. The evaluation involves establishing some criteria against which each alternative is compared. When multiple criteria are involved, they typically do not carry equal weight. The criteria that consumers use in the evaluation result from their past experience and feelings towards various brands, as well as the opinions of family
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NICMAR members and friends. Differences in the criteria or in the relative importance that different consumers place on them are what determine market segments.
5.6 PURCHASE AND RELATED DECISIONS: After searching and evaluating, the consumers must decide whether to buy. Thus the first outcome is the decision to purchase or not to purchase the alternative evaluated as most desirable. If the decision is to buy, a series of related decisions must be made regarding features, where and when to make actual transaction, how to take delivery or possession, the method of payment, and other issues. So the decision to make a purchase is really the beginning of an entirely new series of decisions that may be as time consuming and difficult as the initial one. Alert marketers recognize that the outcome of these additional decisions affects satisfaction, so they find ways to help consumers make them as efficiently as possible. Selecting a source from which to make a purchase is one of the buying decisions. Sources can be varied as mail order houses or manufacturers outlets. The reason a consumer chooses to shop at a certain store is called patronage buying motives. Some common patronage motives are:
Location convenience
Service speed
Merchandise accessibility
Crowding
Prices
Merchandise assortment
Services offered
Store appearance
Sales personnel
Mix of other shoppers
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NICMAR The marketing concept emphasizes customer satisfaction, yet only in the last few years has a serious effort been made to understand what satisfaction means. The level of satisfaction is determined when a consumer compare the performance expected from a product with the performance experienced in consuming the product. If performance equals or exceeds expectations, the consumer is satisfied. However, if performance falls short of expectation, dissatisfaction results. Consumers expectations come from the past product use, information from social sources, and sales presentations and advertising.
5.7 POST PURCHASE BEHAVIOR: What a consumer learns from going through the buying process has an influence on how he or she will behave the next time the same need arises. Having gathered information, evaluated alternatives, arrived at a decision, the consumer has acquired additional knowledge about the product and various brands. Furthermore, new opinions and beliefs have been formed and old ones have been revised. Post purchase cognitive dissonance- a state of anxiety brought on by the difficulty of choosing from among several alternatives. This occurs when each of the alternatives seriously considered by the consumer has both attractive and unattractive features. Consumers try to reduce their post purchase anxieties. They avoid information that is likely to increase the dissonance. And they seek out information that supports their decision, even to the extreme of reading ads for a product after it has been purchased. Also, prior to the purchase, putting more effort into evaluating alternatives can increase a consumer‘s confidence and reduce dissonance.
5.8 SOCIAL AND GROUP FORCES: The ways in which we think, believe and act are determined to a great extent by social forces and groups. And our individual buying decisions including the needs we experience the alternatives we consider, and the way in which we evaluate them- are affected by the social forces that surround us.
5.9 CULTURAL INFLUENCES:
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NICMAR Culture is a complex of symbols and artifacts created by a society and handed down from generation as determinants and regulators of human behavior. The symbols may be tangible or intangible. It does not include instinctive acts. However, the way people perform biological instinctive acts such as eating is culturally influenced. Cultures do not change over time, as old patterns gradually give way to new ones. Marketing executives must be alert to these changes so that they can adjust their planning to be in step with, or even a little ahead of, the times. Some cultural trends affecting the buying behavior of the U.S. consumers in recent years include the following:
Time has become as valuable as money.
Two-income families are the norm.
Gender roles are losing their identity.
Young and healthy is in, old and sick are out.
5.10 INFLUENCE OF SUBCULTURES: Subcultures are groups in a culture that exhibit characteristic behavior pattern sufficient to distinguish them from other groups within same culture. The behavior patterns that distinguish subcultures are based on factors such as race, nationality, religion, and urban-rural identification. A subculture takes on importance in marketing if it constitutes a significant part of the population and specific purchasing patterns can be traced to it. In the1990‘s increasing attention is being paid in the U.S. to behavioral influences stemming from racial and ethnic subcultures-blacks. Early immigrants came to America primarily from Europe. In the 1990‘s they will come primarily from Asia and Latin America. These new subcultures bring with them different attitudes, beliefs, customs and languages that must be taken into account by firms attempting to sell to them. In reality, of course, subculture is not a sufficient basis for market segmentation. But marketers must be aware of how sub cultural characteristics influence buying behaviors.
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NICMAR
5.11 SOCIAL CLASS INFLUENCES: Social class is a ranking within a society determined by the members of the society. People‘s buying behavior is often influenced by the class to which they belong or to which they aspire. One scheme useful to marketing managers is the five-class model developed by Coleman and Rainwater, classifying people primarily by education, occupation and type of residential neighborhood. Notice that income is not one of the classification factors. Social class is not an indication of spending credibility; rather it is an indication of life styles and preferences.
5.12 REFERENCES-GROUP INFLUENCES: Each group in a society develops its own standards of behavior that they then serve as guidelines or frames of references, for individual members. Members share values and are expected to group‘s behavioral patterns. But a person does not have to be a member of a group to be influenced by it, mere aspiration would do. All of these are potential reference groups-groups of people who influence a person‘s attitudes, values and behavior. Reference group influence can extend to the decision to purchase as well as the choice of a particular brand. If an item is a luxury as opposed to a necessity, the decision to buy or not is influenced by reference groups. In addition if the item will be consumed publicly, reference group influence tends to affect brand choice.
5.13 FAMILY AND HOUSEHOLD INFLUENCES: A family is a group of two or more people related by blood, marriage or adoption living together in a household. Many people may belong to two families during their lifetime. The birth family determines core values and attitudes while marriage family has a more direct influence on specific purchases. In a household any of the family members may influence the particular purchase. For example in a particular purchase children of the household are the purchase decision makers, then the manufacturer is likely add something to his product that attracts children like packaging in a way keeping in mind the children as purchase decision makers.
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NICMAR 5.14 PSYCHOLOGICAL FACTORS: One or more motives within advertising person activate goal-oriented behavior. One such behavior is perception—that is, the collection and processing of information. Other important psychological activities that play advertising role in buying decisions are learning, attitude formation, personality, and self-concept.
FIGURE: 16
5.15 MOTIVATION- THE STARTING POINT: To understand why consumers behave as they do, we must first ask why a person reacts at all. The answer is ―because he or she experiences a need.‖ All behavior starts with a need. A need must be aroused or stimulated to move and individual to seek satisfaction. We may have dormant needs that do not produce behavior because they are not sufficiently intense. Hunger that is strong enough that we search food is an example of aroused need that becomes motives of behavior. Identifying the motives for behavior can range from simple to impossible. Buying motives can be grouped on Page 70
NICMAR three different levels depending upon consumer‘s awareness of them and their willingness to divulge them. At one level buyer recognize, and are quite willing to talk about, their motives for buying most common, everyday products. At the second level they are aware of their reasons for buying but will not admit them to others. But when questioned about their motives, they may offer reasons that they think will be socially appropriate. The most difficult motives to uncover are those at the third level, where even the buyers cannot explain the factors motivating their buying actions. These are called unconscious or subconscious motives. A purchase is often the result of multiple motives, which may be conflicting. Accomplishing all of these objectives in one purchase may be difficult. Finally different behavior by the same person at various points may result from the same motive, and identical behavior by several people may result from different motives.
5.16 CLASSIFICATION OF MOTIVES: Motives can be grouped in two broad categories:
Needs aroused from psychological states of tension (as the need for sleep).
Needs aroused from psychological states of tension (as the need for affection and self-respect).
The psychologist Abraham Maslow formulated a theory of motivation. Maslow recognized that a normal person is most likely to be working toward need satisfaction on several levels at the same time, and that rarely are all needs on the given level fully satisfied. However, the hierarchy indicates that the majority of needs on a particular level must be reasonably well satisfied before a person is motivated at the next higher level. When direct questioning fails to provide the richness and details about motivation that marketers seek, other research approaches like the ethnographic research is employed. This involves how consumers interact with a product and then deducing how it fits into their lives. Research tools will include photography, videotaping, lengthy interviews, and written descriptions of behavior.
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NICMAR 5.17 PERCEPTION: A motive is an aroused need. It in turn activates behavior intended to satisfy the aroused need. Since behavior can take many forms, a person gathers information from the environment to help in making a choice. The process of receiving, organizing, and assigning meaning to information or stimuli detected by our five senses is known as perception. Perception plays a very vital role in the stage of buying decision process where alternatives are not identified. In an instant a mind is capable of receiving information, comparing it to a huge store images in memory, and providing an interpretation. Though important visual stimuli are just one factor in perception. A recent study of common odours that evoke pleasant childhood memories found that older consumers identified natural smell of horses, flowers, and hay. However, younger subjects associated pleasant recollections with the scent of play-doh and even jet fuel. Marketers are using this type of information to odorize products and shopping environments to create positive perceptions. Every day we come in contact with an enormous numbers of marketing stimuli. However, the perceptual process is selective in very specific ways. Consider that we pay attention by exception. That is of all the marketing stimuli our senses are exposed to, only those with the power to recapture and hold our attention have the potential of being perceived. This phenomenon is called selective attention. As part of perception, new information is compared with a person‘s existing store of knowledge, or frame of reference. If an inconsistency is discovered, the new information will distorted to confirm to the established beliefs. Thus a snack food ―addict‖ may say ―all this talk about a balanced diet is just propaganda from the health ministry.‖ This is selective distortion. We retain only part of what we have selectively perceived. For example, nearly80 percent of Americans cannot remember a typical TV commercial one day after seeing it. This is known as selective retention. There are many communication implications in this selective process. For e.g. to grasp and hold attention, an ad must be involving enough to stimulate to seek more information. If the ad is familiar, it will be ignored. On the other hand if it is too complex, the ad will be judged not worth the time and effort to figure out. Thus the goal is mildly ambiguous first impression that heightens the consumer‘s interest.
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NICMAR Selective distortion tells us that the marketers cannot assume that the consumers even if it is factually correct, will necessarily accept a message, as fact. In designing a message, the distance between the audience‘s current belief and the position proposed by the message must be considered. If the distances are large, a moderate claim may be more believable than a dramatic claim, and therefore more effective in moving consumers in the desired direction. Even messages received undistorted are subject to selective retention. Consequently, ads are repeated many times. The hope is that numerous exposures will etch the message into the recipient‘s memory.
5.18 LEARNING: Learning is changes in behavior resulting from observation and experience. It excludes behaviors that are attributable to instinct as breathing or temporary states such as hunger and fatigue. Interpreting and predicting consumer learning enhances our understanding of buying behavior, since learning plays a role at every stage of buying decision-process. No universally acceptable and workable learning theory has emerged. However one with direct application to marketing strategy is stimulus response theory. According to this theory learning occurs as a person‘s response to some stimulus by behaving in a particular way is rewarded for a correct response or penalized for an incorrect one. When some correct response is repeated in reaction to the same stimulus, a behavior pattern or learning is established.
5.19 PERSONALITY The study of human personality has given rise to many divergent schools of psycho logical thought. Personalities defined broadly as an individual pattern of trade that influences behavioral influences. It is generally agreed that personality traits do influence consumer's perceptions and buying behavior. Many studies have been made in this relation. The findings generally have been too inconclusive to be of much practical value. Although we know, for example, that peoples personalities often are reflected the clothe they wear, the cars they drive, etc. we have not been successful in predicting behavior from particular personality trades. 4\ The reason being that many things decides personality enters into the consumer buying decision process. Page 73
NICMAR
5.19.1 PSYCHOANALYTIC THEORIES OF PERSONALITY Freud contended that there are three parts to the personality
The id houses the basic instinctive drive, many of which are antisocial.
The superego is the conscience, accepting moral standards and directing the instinctive drives into acceptable channels.
The ego is the conscious, rational control centre that maintains the balance between the uninhibited instincts of id and the socially oriented, Constraining superego.
The psychoanalytic theory has caused marketers to realise that they must appeal to buyer‘s dreams, hope, and fears. Yet at the same they must provide with socially acceptable rationalization from any purchases.
5.19.2 THE SELF-CONCEPT Psychologist distinguishes between the actual self concept the way you see yourself and the ideal self concept the way you want to be seen. Study of purchase show that people generally prefer brands and products that are compatible with their self-concept. However, there are mix reports concerning The degree of influence of the actual and ideal self-concept on brand and product preferences. Some researchers contend that consumption; preferences correspond to a persons actual SELF-CONCEPT. Others fold that the ideal self-concept is dominant in consumer‘s choices.
5.20 ATTITUDES An attitude is learned predisposition to respond to respond to an object or a class of objects in consistently in favourable or un favourable way.
All attitudes have the following characteristics:
Attitudes are learned: for example, the opinions expressed by a friend about diet foods plus the consumer‘s favourable or unfavourable experience as a result of using diet foods will contribute towards diet food in general.
Attitudes have an object.
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Attitudes have direction and intensity our attitudes are either favourable or unfavourable towards the object. They cannot be neutral.
Attitudes tend to be stable and can be generalized. Ones formed attitudes usually endure, and the longer they are held, the more resistant to change they become.
It can be extremely difficult to change strongly held attitudes. Consequently, when the marketer is faced with negative or unfavourable attitudes, there are two options:
Try to change the attitudes to be compatible with the product.
Determines what the consumers‘ attitude is and then change the product to match those attitudes.
5.21 SITUATIONAL INFLUENCES: The situational influence tends to be less significance when the consumer is loyal to a brand and when the consumer is highly in the purchase. They often play a major role in buying decision. The five categories of situational influences are related to when, how and why consumers buy as well as the conditions under which they buy.
When consumers buy- the time dimensions Marketers should be able to answer at least three questions about consumer buying:
How does the season, week, day or hour influence it?
What impact do past and present events have on the purchase decision?
How much time does the consumer have to make the purchase and consume the product?
The time dimension of buying has implications for promotion scheduling. Promotional messages must reach consumers when they are in a decision making frame of the mind. It also influences pricing decision, as when marketers adjust prices in an attempt to even out demand. If seasonal buying patterns exist, marketers can tailor their merchandise accordingly.
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NICMAR The second question concerns the impact of past and future events. Marketers need to know enough about the recent and planned behaviour of targeted consumers to anticipate the effects of these past and future events. The growth and popularity of fast-food restaurants, quick-services, and catalogue retailers are marketer‘s responses to consumers experiencing time pressures. Dualincome households, job activity and mandatory leisure-time activities leave little time for relaxed shopping. To help consumers conserve time, marketers are making large and small changes, to help customers locate specific products and therefore reduce shopping time, a number of supermarkets have computer- generated directories attached to their shopping carts.
5.22 ANALYSIS OF THE SURVEY DONE: Questionnaire was prepared considering three aspects: 1. Socio economic details This was considered so that the samples can be divided into lower income group and middle income group and to know the number of members in the family. 2. Details needed while purchasing the house This factor was considered to know the attitude of the respondent towards buying a house. 3. Purchase decision process This factor was considered to what factors which effect the decision for buying a house. Totally 8 respondents were selected.
5.22.1 THE FOLLOWING ANALYSIS WAS DRAWN FROM THE SURVEY: 1. Amongst the 8 respondent 5 were lying in the lower income group and 3 were lying in the middle income group. Out of the 5 respondents 1 was from economically weaker section. 2. About 75 % of the respondents were living in unitary family and the remaining 30 % were in a joint family. 3. Family members was generally below 5 but for lower income group it was as high as 8. 4. 25 % of the people were residing in their own house and 62.5 % were living in a rented house and 12.5 % were living in slum dwelling. Page 76
NICMAR 5. Out of 62.5 % people living in the rented house 60 % were planning to buy a house in 2 to 5 years and the remaining were planning to buy it after 5 years. 6. All of the respondents living in rented houses were of the opinion of choosing the builder on recommendation. 7. Out of the 8 respondents 62.5% wanted to invest in land and house and the remaining wanted to invest in jewellery. There was no respondent who was willing to invest in shares. 8. The entire respondent agreed to invest about 50 % of their income in house. 9. 75 % of the respondent wanted to live in a flat and the remaining wanted to live in bungalow. 10. 87.5 % of the respondents wanted to live in the heart of the city. 11. 50 % wanted to have a house within the range of 6-8 lakhs 37.5 % were agreeing for a house of more than 15 lakhs and 12.5 % wanted it to be between 2-4 lakhs. 12. All of them agreed that buying a house is an investment and 75% wanted to live in that and the remaining wanted to rent it. 13. 40% agreed for arrangement of finance by the builder. 14. 62.5% wanted to take loan from bank and the remaining wanted to borrow it from relatives and friends. 15. Advertisement in media and word of mouth were the two popular ways of buying a particular plot with word of mouth having the highest preference. 16. There was a mixed notion about the problems faced for buying the house. 25 % told that arranging finance is a bigger problem while 25% were of the view of delay due to getting approvals from the authority. Some of them were having problem of possession and some were having problems in land availability. 17. 87.5 % of the respondent were of the view that when there will be enough income than they will go for purchasing the house. 18. Colleagues, relatives and friends were the top three choices whom the buyer will consult for purchasing the house. 19. Almost all the respondents said that financial risk was the main risk involved in purchasing the house. 20. Consulting with corporations was the most preferred choice for risk mitigation during purchasing. 21. In most of the cases husband was the decision maker for purchasing. 22. House has become an essential need for a family was ranked highest by the respondents. 23. Medium size plots were opted by 62.5 % respondents and the remaining opted for small size. 24. 62.5 % of the respondents wanted to design the house according to the site requirement and the remaining wanted to have it by vastu. 25. Maximum respondents wanted to have shopping centre, school and clinic near their house. Page 77
NICMAR 5.22.2 THE ABOVE ANALYSIS CONCLUDES THE FOLLOWING POINTS: Attitude of the people towards buying a house totally depends upon the income generated in their household Most of the families wanted to live in a flat with amenities according to the need of the people. Most of the people rely on their relatives and friends for decision of buying a house. There was not even a single respondent who wanted to consult a firm for doing so. For financing people rely on house loans and the biggest problem which people face in buying is that of finance. Housing today has become a need for a family and respondents agreed for investing maximum amount of their income for housing. For medium and low income group affordability is the major issue and thus arises the need of affordable housing.
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NICMAR CHAPTER 6 6.0 VK NARDEP CASE STUDY 6.1 INTRODUCTION As India tries to shed its tag of ‗developing country‘ and come in the league of ‗developed nations‘, one of the precondition is to provide food, shelter and clothes for all. A major crisis for our country‘s development is the problem of squatter settlement with nearly 100 million people living in slums and slum-like conditions without adequate basic facilities. These numbers are expected to touch 200 million by 2020. India's housing shortage is estimated to be as high as 40 million units and demand from the low income segment constitutes a large proportion of this shortage. This has given rise to need of Affordable Housing in India. India has a massive sanitation and public hygiene problem (Affordable housing for masses). More than half a billion citizens don't have a toilet and the country needs to build 78 new ones every minute over the next four years to meet the Government's ambitious sanitation target. One in two Indians, or about 650 million people, defecates in the open. The untreated waste poses a serious health risk. In 2007 India added about 11 million toilets, but the Government wants the rate of construction to rise considerably. The national coordinator of aid agency Water Aid India, Richard Mahapatra, used official data to estimate that 40,000 new toilets a day are needed to reach the Government's goal of making a lavatory available to every citizen by 2012. Pre engineered buildings is one of the techniques that can be used for fast and economic building of houses and toilets in India. This paper studies the opportunity of pre engineered building techniques to provide affordable housing and sanitation solution.
6.2. BACKGROUND OF THE STUDY Vivekananda Kendra is a spiritually oriented organisation based on the principles preached by Swami Vivekananda, It was formed on January 7 1972. VK NARDEP (Vivekananda Kendra Natural Resources Development Project) is an integral project of Vivekananda Kendra. It seeks to address environmental and social welfare issues in Kanyakumari and neighbouring areas. VK NARDEP is working for sustainable development in the fields of: Cost effective Construction Technologies
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NICMAR Water management Sustainable farming Holistic help New and renewable energy sources Inner sustainability In the field of cost effective technology, VK NARDEP is in quest of locally available alternatives for affordable housing. The salient feature of such housing projects is to avoid excessive use of cement and steel and increase the use of locally available material. Some of the products of VK NARDEP are Compressed Earth Blocks Hollow and Pavement Blocks Ferro-cement Doors(Pre engineered) Ferro-cement Roofs(Pre engineered) Walling-Rat Trap Bond Different Types of Arches vaults and Domes Roofing-Different types of filler Slabs(Pre engineered) Toilets Made of Ferro-cement(Pre engineered) This paper studies the various pre engineered components of the buildings at VK NARDEP and proposes a model based on the prefabricated construction for affordable housing.
6.3. SALIENT FEATURES VK NARDEP has prepared following six models in their Gramodaya Park, a technology centre at Vivekananda Ashram, Kanyakumari, India. Pratyusha Anala Soma Dhara Dhruva Apa
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NICMAR The six models prepared have different style of construction and different types of materials are used in these. Only the pre engineered components are discussed in this paper.
6.3.1 ROOFING 6.3.1.1. FUNICULAR SHELL ROOF This particular type of roofing is used in PRATYUSHA model. It has a 6 mm steel rod at the bottom and having a 6 mm metal concrete with joist. Figure 17 and figure 18 shows the particular structure and how it is applied in this particular model.
Figure 17: Funicular Shell in Pratyusha Model
Figure 18: The model of Funicular Shell
The funicular shell roof is a compression structure, which ensures conservation of natural resources by utilising waste materials, like disposed plastic material, effectively and optimising the use of expensive steel and cement. Further, the arch distributes the point load and neutralizes it and decreases the bending moment so that it is able to withstand impact load at any point. The advantages of using Funicular Shell roof are: It gives an aesthetic look to the building It has a good load bearing capacity Reduce use of steel reinforcement used. Allows efficient use of waste materials Improves the aesthetics. Minimises requirement of internal plasters. Provides roofing at a lower cost.
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NICMAR 6.3.1.2. REIFORCED BRICK PANEL SLAB This type of roofing is used in Anala model. Reinforced Brick panel Slab contains the following things: A brick panel of the size of 120 cm X 53 cm. A RCC joist of 13 cm of height and 10-12.5 cm width is used The finish on the top is with cement concrete 2.5 cm thick Figures 18-21 shown below gives the details about the Reinforced Brick Panel Slab and the RCC joist:
Figure 18: Brick Panel
Figure 19: Steel Joist
Figure 20: Brick panel used in Anala Model
Figure 21: Brick panel
The reinforced brick panels use approximately 17 bricks in 1:4 cement: sand mortar and two mild steel bars of 6 mm diameter. This system needs partially precast concrete joists for supporting the panels. The brick panels are then placed over the joists and joined together with 1:4 cement mortar (Figure 22). A concrete screed of Page 82
NICMAR 2.5 cm of M l5 grade is laid over the entire roofing after providing necessary reinforcement at the joints (Reinforced brick panel roofing system). It is best to provide a joist of such dimension when the span of the room is about 3 to 3.5 m.
Figure 22: Reinforcement Details
Advantages of Reinforced Brick Panel slab over conventional slabs are: This composite roofing system is up to 40% economical compared to conventional RCC slab. There is saving in steel and cement. Brick panel roofing can bear the same load as RCC roofing. The cost of shuttering is saved.
6.3.1.3. FERRO-CEMENT ROOF SLABS This type of roofing is used in Dhruva Model made by VK NARDEP. The main features of this type of roofing are: Two different types of Ferro-cement Channels are made. These are made in semi-cylindrical shapes. The basic design consists of two reinforcement bars of 8 mm thickness at the bottom and one 6 mm bar at the middle. Depending upon dimensions of the roof various channels are joined together.
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NICMAR Figure 23 explains the manufacturing process of Ferro-cement channel (The Hindu: Property Plus Thiruvanathapuram). These roofs can also be made of different shapes using cement, sand, steel bars, chicken and welded mesh. The idea of using cement mortar reinforced with wire mesh for versatile purposes has been around for some time. Its durability and serviceability, coupled with the low production costs, has made Ferro-cement a favourite of architects and engineers concerned with low-cost housing. However, the versatility of the material that allows itself to be moulded into any shape has endeared Ferro-cement with more people these days (The Hindu: Property plus Thiruvananthapuram). Figure 9 shows Dhruva Model Prepared by VK NARDEP. The advantages of Ferro-cement roofing channels over conventional RCC roofing are as follows: 1) Consumption of raw material (cement and steel) is less as compared to RCC roofing 2) Light Weight and strong and even suitable for earthquake prone zone 3) Erection is simple and cheap and can also be used in Multi storeyed buildings. 4) Can be transported easily.
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NICMAR Figure 23: Making of Ferro-cement channel(The Hindu: 1 October, 2005)
Figure 24: Dhruva Model
Figure 25: Ferro cement Roofing Channel
6.4. FERRO-CEMENT DOORS AND WINDOWS The increase in the use of wood to cater to the need of ever increasing population has added to the deforestation and subsequent environmental problems. An alternative to this is use of Ferro-cement doors and windows. The process which is followed in this is: First mesh is prepared according to the size of the door. It is folded and is then bind with the binding wires to the required size. Preparation of the floor by applying oil to enable easy removal of casted doors. Over the mesh cement mortar is spread and again over it a mesh is placed. Again the desired amount of cement mortar is placed over the second layer of mesh. And it is stripped off to flat the surface. Hinges and door joints are fitted after curing. The Figure 26-29 shown below gives the plan and sectional details of the Ferrocement doors.
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Figure 26: Plan
Figure 27: Door with various assemblies
Figure 28: Section at A-A
Figure 29: Section at C-C
Advantages of Ferro-cement doors and windows over conventional wooden doors and windows 1) It is easy to make and is strong and durable 2) Raw materials are easily available 3) Is water resistant, fireproof and safe against termites 4) Can be made by semi skilled worker after a short training period 5) As only manual labour is involved an enterprise can be started with low investment 6) Can be repaired easily. 7) It is easy to transport and fix 8) Reduce use of timber and is hence environment friendly. 9) Can be made in various shapes and design Figures 30 and 31 below show specimens of Ferro-cement door and window
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Figure 30: Ferro-cement Door Figure:
Figure 31: Ferro-cement Window
6.5. FERRO-CEMENT TOILET Toilets are made out of Ferro-cement panels. The panels are cast separately and are then brought to the site and assembled. Following are the main components used in Ferro-cement toilets Cement Sand All around GI mesh 6 mm skeletal steel Ferro-cement toilets are used in India since 1980. The figure shows the toilet made in Gramodaya Park by VK NARDEP.
Figure 32: Ferro cement toilet
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NICMAR Advantages of using Ferro-cement toilet over the conventional toilet are: Basic raw materials are readily available. The skills of Ferro-cement construction can be acquired easily. Heavy plant and machinery are not involved. Easily repaired and virtually no maintenance is required. Handy and economical. Quick construction. High durability. High versatility.
6.6. THE PROPOSED MODELS The models proposed in this paper cater to affordable housing for the economically weaker sections.
6.6.1. MODEL 1 Model 1 is made using different components and has some of the structures as pre engineered. The structure consists of the following components: 1) Foundation: The foundation shall be soil-cement stabilized and having a proportion of cement soil for the desired strength of the soil. 2) Plinth: SRC block masonry and with SR cement. 3) DPC: 1:2:3 concrete with polythene. This technology was formed by CWHR(Council for Works and Housing Research) 4) Superstructure: Compressed Earth blocks (pre engineered). 5) Roof: Reinforced brick panel slab (pre engineered). 6) Door: Ferro-cement door & window shutters (pre engineered). 7) Flooring: Compacted earth 3‖ thick soil-cement stabilized base and 1 ½‖ thick topping with 1:3:3 concrete smoothly finished. (Technology developed by CWHR) Table 1 below gives technical specification and cost analysis of different of this model
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NICMAR TABLE1: ITEM
TECHNICAL
COST
SPECIFICATIONS 1) FOUNDATION
0.8
m
depth
foundation,
of 16 Rs / cubic feet
compacted
base with 90 % dry density,3 layers with 3 % soil – cement mixture 2) SRC Block masonry Sulphate resistant blocks 28 Rs / block with SR cement
are given in the plinth level
3) DPC
2" thick
170 Rs /cubic feet
D.P.C(1:2:3
concrete
with polythene sheet in plinth) 4) Compressed
Earth Sand 50%, Clay 20%, 2 Rs/ Block
Block(Superstructur
Gravel-15%,
e)
For
silt-15%.
Stabilization
add
cement/lime @ 5 % by weight. Block Size 19cm x 9cm x 4 cm (IS 1725). 5) Reinforced panel Roofing
brick Length not more than 1.1 170 m
for
bricks
Rs
/
having Panel(estimated)
strength less than 40 N/ mm2 and 1.2 m for bricks having
strength
more
than 40 N/ mm2, width is restricted to 45 cm for panels
of
modular
size(190mm X 90mm X 90mm) of bricks and 53 cm for panels made
of
conventional Page 89
NICMAR size ( 230 mm X 110 mm X 75mm) and depth 75 mm for conventional size bricks and 90 mm for
modular
size
bricks.(IS 14143) 6) Precast Joist
Partially
precast
joist Depends upon the size of
shall be rectangular in
the room.
shape with steel stirrups kept projecting out which shall be tied with reinforcement along the joist
to
achieve
monolithicity concrete
with and
the
minimum recommended as per design ( IS 14142 : 1994 ) width is 13 cm, which may be increased if required for structural strength.(IS 14143) 7) Door and windows
Two layers of hexagonal 1500 Rs/ Door wire mesh all around 6 800 Rs/ Window mm skeleton
8) Flooring
Flooring is done using 40 Rs/ sqft compacted earth and a topping of 1:3:3 concrete smoothly finished
6.6.2. MODEL 2 This model uses Ferro-cement for wall and roof construction of a 1 BHK facility. The parameters of the facility are as mentioned below: 1) Building System Description: Page 90
NICMAR Foundation: Pedestal Foundation with precast RCC beam(pre engineered) Walling: Ferro-cement wall panels (pre engineered). Roofing: Ferro-cement shell roofing (pre engineered). Flooring: Cow dung leaping/brick flooring/ IPS (pre engineered). Doors/ Windows: Ferro-cement doors and windows (pre engineered). Finishing: Any type of paint for external and internal painting. 2) Application: Suitable for: Hard strata preferable but construction may be done on any type of soil strata. Disaster Resistivity: Earthquake, cyclone and flood resistant. Thermal Behaviour: Due to thin section of wall panel & shell roof temperature is slightly high as compared to conventional techniques. 3) Environmental Friendliness and Energy Efficiency: Energy efficient, using waste of stone crusher. 4) Advantages claimed: Cost is very low. Speed of construction very fast. Low maintenance Labour oriented technology Easily replaceable. 5) General: Skill Requirements: Semi-skilled workers. Equipment Requirements: Ferro-cement wall panels and shell making machine and other normal construction tools. 6) DIMENSIONS: Size of panel: 1200mm*900mm or 1200mm*1200mm or any other dimension to suit the requirement. Flange depth:150mm Thickness:25mm 7) Properties: Compressive strength: 150kg\cm2 Water absorption: <5% 8) Raw material required: Page 91
NICMAR Cement ,coarse sand, aggregate ,polypropylene fibre, admixture, welded mesh
Table 2 below gives technical specification and cost analysis of different of this model TABLE2: ITEM
TECHNICAL
COST
SPECIFICATIONS 1) FOUNDATION
Pedestal foundation with Depends upon the depth precast RCC beam
of the foundation and size of the building.
2) Walling:
Ferro- 1200mm*1200mm panel
cement wall panels
325 Rs / Panel
size with thickness of 25 mm and flange width of 150 mm
3) Roofing
Ferro-cement
channels 490 Rs/ Panel
having 6 mm diameter at top and 8 mm diameters at bottom. 4) Flooring:
Indian 3 inches thickness and 1 26 Rs / sqft
Patent Stone 5) Doors/ Windows
square foot area Two layers of hexagonal 1500 Rs/ Door wire mesh all around 6 800 Rs/ Window mm skeleton
6.7.1 COST ANALYSIS OF FERROCEMENT PANELS FOR WALLS AND ROOFS:
6.7.1.1 MATERIAL COST PER SQUARE METRE (INDIAN RUPEE) FOR A SINGLE UNIT: 12mm (D12) mild reinforcing rod crisscrossed to make a 500mm ‗mesh‘: 4 m at 37000/tonne = Rs 131.5 Page 92
NICMAR 6mm mild steel rod crisscrossed to make a 200mm mesh: 25m at 37000 Rs/tonne = Rs 205.55 12mm mesh galvanised chicken wire 900mm wide, four layers = 4.44 m at = Rs 146.02 1.6 mm Lacing wire to tie the chicken wire on: say 7 m at 37000 Rs/tonne = Rs 4.09 Total steel cost: Rs 488 (approx) Plaster at average 20mm thick = 0.02 cubic metres, less steel = 0.0138 Say 0.6 is Sand: at Rs 450/cubic metre = Rs 2 Say 0.4 is Cement at Rs 265/ bag = Rs 1 Plus plasticiser at Rs 38/litre 5mls = Rs 0.2 Total plaster cost = Rs 3.2 Total material cost for 20mm thick Ferro-cement panel: Rs 491.2/square metre = Rs 492/square metre
6.7.1.1 MATERIAL COST PER SQUARE METRE (INDIAN RUPEE) FOR A SINGLE UNIT: Skilled labour required for 2.5 metre dome of say 30 square metres of wall and roof, not counting detailing like gutters, doors and windows, just the flat surfaces: 12mm bars bent and tied in place: 4 hrs 6mm rod bent and tied in place: 16hrs chicken wire cut and laced on: 24 hrs plastered inside and out, first coat: 16 hrs plastered, second coat if needed: 12 hrs final coat sponged/rubbed/scraped 6 hrs Total 78 hrs, divided by 30 square metres = 2.6 hrs/square metre, or say Rs 81.25 at a skilled worker‘s rate of Rs 31.25/hr (Taking the standard labour cost as Rs 250/Day). To execute the work in less time we shall need more skilled labour and for ―fiddly bits‖ the time for one square meter is doubled i.e. 5.2 hours/square meter. So the labour cost may increase to Rs. 162.5. The above analysis concludes that use of Ferro-cement will be a viable option only for small amount of works otherwise the amount of skilled labour required will be more.
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NICMAR 6.8. COST ANALYSIS OF REINFORCED ROOF PANEL Considering 1200 X 530 X 75 mm size of the Reinforced roof panel. Volume considered= 0.0477 m3 Assuming 17 bricks used in one panel. Volume of bricks= 0.0323 m3. Amount @ Rs 32/ Brick= Rs 544 Two 6 mm diameter of reinforcement. Volume =2.823 X 10 -5 m3. Amount @ Rs 37000/ tonne = Rs 19 Quantity of cement = 0.01537 m3. Amount @ Rs 265/bag = 115 Rs. Hence total material cost = Rs 678 /panel. The analysis shows that the cost of such roofing is less than standard RCC roof cost of 760 Rs/ sq meter
6.9. SANITATION The analysis of rate for rural sanitation study which is being carried at kanyakumari using Ferro-cement technology is shown in figure 17 above. It is inferred that cost of single toilet comes out to be Rs 8900 which is less than the conventional method in which the cost comes out to be Rs 20000 for rural areas.
Figure 33: Kanyakumari Sanitation Project (BNS Emergency sanitation)
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NICMAR CHAPTER 7 7. CONCLUSION From the above study we have come to the following conclusions: 1) Affordable housing depends upon the income generated by an individual or a household. 2) Meaning of affordable housing varies from individual to individual and on the segment (group) he belongs to. For example affordable housing for low income group personnel will be different than a person belonging to medium income group. 3) Affordable housing is dependent upon the requirement of the individual and his household and his ability for affording it. 4) Household community driven approach to construction of new dwellings is cost effective and would require fewer subsidies. 5) Project design with community-driven construction of new units and differential unit subsidy based on household affordability across income groups would help leverage higher amount of local resources. 6) With an increase in subsidy by less than twice the amount planned presently under the Nagpur Project, coverage would increase four times and include all slum households in the city. 7) Attitude of the people towards buying a house totally depends upon the income generated in their household 8) Most of the families wanted to live in a flat with amenities according to the need of the people. 9) Most of the people rely on their relatives and friends for decision of buying a house. There was not even a single respondent who wanted to consult a firm for doing so. 10) For financing people rely on house loans and the biggest problem which people face in buying is that of finance. 11) Housing today has become a need for a family and respondents agreed for investing maximum amount of their income for housing. 12) For medium and low income group affordability is the major issue and thus arises the need of affordable housing. 13) From the above analysis it is inferred that use of pre engineered technology proves to be cost effective for squatter settlement and can also be used for rural sanitation.
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NICMAR 14) Ferro-cement may be fabricated into almost any conceivable form to meet the particular requirements of the user. This is particularly pertinent where acceptance of new materials may be dependent on their ability to reproduce traditional designs. 15) Cost benefit analysis of the Ferro-cement shows that it is only suitable for small works as for large works the amount of skilled workers will be more. 16) It is seen that the cost of reinforced Roof panel is less. 17) Pre-engineered technologies will reduce the cost of the building and also it will reduce the time cycle. 18) It can also be inferred that pre engineered is more economical than conventional toilets for rural areas.
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NICMAR 8. REFERENCE: 1. A.M. Salama, ―A life style theories approach for affordable housing research in
Saudi Arabia‖: COLLEGE OF ENVIRONMENTAL DESIGN, King Fahd university of petroleum and minerals-KFUPM, Dhahran, kingdom of Saudi Arabia. email:
[email protected]. < http://www.engg.uaeu.ac.ae/ejer/issues/v11/pdf_iss1_11/p7_a_life_style_theories.pdf > (4 August 2011) 2. Michael P .Johnson, H. John Heinz iii, ―Decision models for affordable housing and sustainable community development‖, School Of Public policy And Management Carnegie Mellon university 5000 Forbes Ave. Pittsburgh, pa 15213-3890
[email protected] < http://www.heinz.cmu.edu/research/297full.pdf > (11 September 2011) 3. ―A report on low income housing in India: challenges and opportunities for microfinance for habitat for humanity India‖. Centre for micro finance at the Institute for Financial Management and Research (IFMR), Chennai, June 2007. < http://www.habitat.org/housing_finance/pdf/low_income_housing_in_india.pdf > (3 October 2011) 4. ―Affordable housing: a key growth driver in the real estate sector?‖. KPMG India.
(24 October 2011) 5. Raju Sarkar- ―Post earthquake housing construction using low cost building materials‖, October 12 2006. (2 November 2011) 6. ―Affordable housing for masses‖, The Financial Times, Sunday, July 20, 2008 (23 December 2011) 7. ―Reinforced Brick Panel System‖ (11 December 2011) 8. ―Property Plus Thiruvananthapuram‖, The Hindu, October 1 2005 (12 December 2011) 9.―Specifications for soil based blocks used in general building construction‖, IS 1725 1982(reaffirmed 1997) 10. ―Prefabricated brick panel and partially pre-cast concrete joist for flooring and roofing – specification‖, IS 14143, 1994.
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NICMAR 11.―District Schedule Of Rate‖, Tehri Garhwal - Uttarakhand District Administration (18 January 2012). 12. ―BNS emergency sanitation, utilisation of Ferro-cement as emergency sanitation hardware‖, Tamil Nadir, India. September 2009 (14 January 2012). 14. ―Proposal for the construction of low cost house at ibrahim hydery‖, karachi (17 January 2012) 15.―International workshop cum exhibition on emerging housing technologies, product / system profiles of innovative technologies building materials & technology‖, promotion council, ministry of housing & urban poverty alleviation government of India November 24-25, 2008 new Delhi, India. (17 January 2012) 16. Loan Affordability Calculator (26 January 2012) 17. ―Employment outlook and salary guide 2010-2011‖, Kelly. (28 January 2011) 18. ―Low income shelter finance in slum upgrading‖, India urban initiatives, December 2007. < http://www.usaid.gov/in/our_work/pdfs/low_income_shelter_fin.pdf > (29 January 2011)
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NICMAR 9.0 APPENDIX Survey of demand, design preferences and civic infrastructure requirements of middle income group housing SOCIO ECONOMIC DETAILS 1. Name of key respondent 2. Address 3. Family status Joint family Unitary family 4. Number of family members: 5. Details of family members Brno
Family member
age
Education
occupation
1 2 3 4 5 6
6. Family income per month(gross) Less than Rs.6000 Between rs.6000 to Rs.15000 More than rs.15000 DETAILS NEEDED WHILE PURCHASING THE HOUSE 7. Where are you presently residing in? Own house Rented house Any other
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NICMAR
8. Are you planning to purchase a house in the near future? Yes No If yes please indicate the approximate time period a) Within 2 years b) Between 2 to 5 years c) After 5 years 9. How do you choose your builder? Past experience advertisement recommendations of other any other(please specify) 10. If you have enough money how will you spend it invest in land invest in house purchase jewellery invest in share markets other type of saving(please specify) 11. What percentage of the saving would you like to invest in your house? 25% 50% 75% 100% 12. What type of building would you prefer? Bungalow flat duplex house any other 13. Area where accommodation required? heart of city prime locations Page 100
NICMAR outskirts satellite towns 14. Kindly give the approximate amount that you are planning to invest on the house? 2-4 lakhs 4-6 lakhs 6-8 lakhs 8-10 lakhs above 10 lakhs 15. Buying a house Is it an investment option? a) yes b) no Whether for giving it on rent or for living? a) rent b) living 16. Would you prefer finance arranged by the builder? yes no 17. Are you planning to take loans from financial agencies? yes no PURCHASE DECISION PROCESS 18. General factors considered before the purchase of the house, according to you advertisement in media builders credibility door to door marketing word of mouth any other 19. What are the problems you may face while purchasing a house? Page 101
NICMAR financial problems getting approvals from authorities delay in getting possession whether the builder will be completing the construction or not any other(please specify) 20. On what occasion was the need for the house identified? after marriage when we got sufficient income when both of us got the job when both of us retired any other(please specify) 21. Which of the following sources will be consulted before you purchase the house? If more than one was consulted, please rank? friends relatives advertisements colleagues builders/developers 22. Do you find any risk in the purchase of the house? yes no If yes, what type of risk? a) clear house transferring b) clear land title c) financial risk d) any other(please specify) 23. What course of action you have for reducing the risk? going for good reputed firms knowing the bye-laws of the corporation in which it falls any other(please specify) 24. Normally who will be the major decision-maker in the purchase in your family? Husband
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NICMAR Wife Son Daughter Husband and wife All members
25. If you are not satisfied with the house what will be your response? keep quiet talk to others about the negative points complain to the authorities any other(please specify) 26. Please rank the following statements according to importance (rank the preferences in the scale of 5) Sr.No
Statements
1
The house has become very essential item for a family
2
Most people in our social group consider it very essential
3
Most people in our social group have it
4
People buy it when they see others have bought it
5
Most of our family friends have it
6
Most of our relatives have it
Rank
27. Please indicate the size of plot you would prefer to buy small 20*40 medium 30*60 Page 103
NICMAR large 40*80 28. Please indicate the size of house you would prefer to have. 1-bhk 2-bhk 3-bhk
29. Please give the preferred area requirements of the house 500-600 SQ.FT 600-700 SQ.FT 700-800 SQ.FT 30. Type of specification required ordinary specification A-class specification deluxe specification 31. Design layout preferred according to site requirements according to vastu 32. Would you like to have the following amenities at extra reasonable cost?Please mark whichever is necessary Sr.No
Particulars
1
Nursery school
2
Clinic
3
Gym/health club
4
Community hall
5
Sports club
6
Shopping centre
RESPONSE
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NICMAR 7
If any other(please specify)
33. Which of the following provision in the city attract you more.(rank the preferences in the scale of 5) Sr.No
Statements
Rank
1
Frequent water supply
2
Well accessibility within city through transport services
3
Good commercial complex and market
4
School, bank, post office and hospital
5
Community theatre
6
Recreational centre and play ground
7
Swimming pool, gym and health club
hall
and
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