BUILDING ECONOMICS & SOCIOLOGY
Introduction to general economics in building industry
Introduction to Building Economics • Building economics is concerned with production and consumption and services and the analysis of commercial activities – • As it is related to architecture and building activity – all types of buildings for all types of functions by the builders (production) and consumption i.e., the ones who either buy or hire those buildings for various functions with the services offered by professionals like architects, planners, engineers etc.
Ends ! scarce means • he scarce means like land, building materials, and allied services result in failing to meet the deman in housing sector.
Basic conce"t – any activity (legally permitted) which shall result in building activities to serve people for which the people are ready to pay the price directly or indirectly by buying or hiring the spaces can be treated as an economic activity.
Goods and ser#ices • !conomic good is a physical ob"ect like natural or manmade (artificial) goods.
Natural goods • #ources like land, water, air, natural stones, sand basic raw materials to be converted to manmade materials to be used for construction of buildings.
Manmade goods $roduct like mosaic tiles, tiles of all stones, ceramic tiles, wall finishes, doors%windows%woodwork, electrical materials, water supply and sanitary pipes and fittings etc, harnessing solar power, A%& plants, heating, cooling etc.
$roducers $roducers are individuals, builders, contractors in private sector or governments state or central.
$rimary "roducers are those who produce raw materials like wood, stones, basic raw materials for production of building materials.
Secondary "roducers are those who are engaged in production of materials like cement, procure sand, metal, steel, aluminium, various other materials to be used in building construction.
%ertiary "roducers ertiary producers are those who carry out the following functions' ransportation Banking Architects and !ngineers etc who offer services, insurance agencies for buildings, educational institutions, who train professionals. • • •
Consumers n good old days, there was barter system with no profit motive. $resent days, the medium of echange is money which is used in so many forms for buying and selling for all activities.
Micro Economics
*icro has been derived from +!!- word *-/#0which mean small .
t is a study of the individual units of economic system .
n other words a small part of economy 1 not the whole economy .
Microeconomics ocuses
on 'o( decisions are made by indi#iduals and )rms and t'e conse*uences o t'ose decisions+
$rinci"les o Micro Economics+ • 2.Budget &onstraints • 3.&hoice • 4.5emand and #upply • 6.7ncertainties • 8.!9uilibrium • :.echnical constraints • ;.$rofit maimi
.*onopoly • 2?./ligopoly • 22.$roduction
Budget constraints • @or individuals, the budget for ac9uiring property depends in the earning capacity of the family per annum, the ability to raise loan, savings, repaying capacity (in 8year% 2?year% 28year loan periods).
C'oice • 5epends on the budgetary capability, savings, willingness to invest, optimum level to spend, location of the property etc, choice of the specifications, reputation of the builders, 9uality of construction, timely completion of pro"ects, proimity to public amenities like transport, railway station, airport etc.
Demand and su""ly 5epends on ational income, financial status of the family to invest, stability of the "ob, location of the place of works, means of transportation. #upply depends on the builders who are willing to invest in construction to meet the demand of various economic level of buyers.
Uncertainties 5epends on the stability of the elected governments at state%central, cost of living availability of land at affordable level, building materials, availability of loans at reasonable rates of interest, skilled and unskilled labour, manpower, government policies, natural calamities, riots, inflation, global economy as well as national economy, imports%eports, technical knowhow.
E*uilibrium ormally, this factor depends on demand and supply which are interdependent to maintain perfect e9uilibrium, policies in five year plans and eecution as per scheduled programs.
%ec'nical constraints Appropriate technology either indigenously developed or ac9uired from other countries, availability of technical epertise like architects, planners, engineers, willing efficient builders, innovative technology to build eco friendly buildings as appropriate to our country and global warming is the need of the hour.
$ro)t ma,imi-ation and cost minimi-ation hese aspects are to be monitored by governmental agencies or some nongovernmental agencies so that builders do not make too much profit taking advantage of the demand as it is happening in the building industry. Building industry comes under ambit of &onsumer $rotection Act. here should be strict rules by sanctioning authorities to see that the building is constructed as per sanction and specifications.
Mono"oly and Oligo"oly n the building industry, there is no monopoly. he only department in central government, which does not have architects is *inistry of ailways and A$ state. hey are managed by engineers only.
here is oligopoly in the building industry i.e., there are reputed builders and reputed producers of building who produce 9uality building materials because of intense competition.
$roduction he demand for housing is always more than the production either in government sector or private sector. he production is occasionally affected by inflation, global economic recession, rising cost of living, over population, scarcity of land in metros and other cities. Cack of proper mass transportation. Availability of infrastructure.
Macro Economics+
*acro is been derived from the +reek word *A-/#0which means CA+!.
*acro economic is the study of large part of the economy i.!.,he whole economy.
he study of economic behaviour of the economy as a whole 1 not the individual economic units of the economy.
Macroeconomics
e,amines t'e aggregate be'a#ior o t'e economy .i+e+ 'o( t'e actions o all t'e indi#iduals and )rms in t'e economy interact to "roduce a "articular le#el o economic "erormance as a ('ole/+
$rinci"les o macro economics . • • • • • • •
2.5emand and supply 3.nflation 4.nterest rate 6.!mployment 8.#avings and nvestments :.*onetary $olicy ;.@iscal $olicy
Demand and Su""ly At national level, this depends on the government policies. Dow different building activities and infrastructure are planned and budgeted. aation polices, direct and indirect ta, allocation of funds for housing for the weaker sections in @ive Eear plans.
In0ation • his aspect depends on how effectively the government can control inflation by eercising control over general price rise and building materials, effective ta collection both at central and state level, maintaining e9uilibrium in demand and supply, earning foreign echange. • he increase in oil prices invariably increase the cost of living in all walks of life including building industry.
Interest rate he finance ministry through B (eserved Bank of 5A) controls the interest rates over products, personal incomes, including housing loans and building materials.
Em"loyment ow ma"or employment takes place only in private sector. /nly an insignificant percentage of employment takes place in central government and state governments. $ension schemes have to be discontinued by the governments. he unemployment rate is very high now either in the underemployment, or employment which is not compatible to 9ualifications, and resulted in crime rate to unprecedented level by either educated or uneducated youth. Cack of proper education like basic education, education in trades which helps the weaker sections.
Sa#ings and In#estments +overnment through nationali
Monitory system and "olicies he monitory systems are controlled by B through nationali
1iscal $olicies #ome @iscal policies are controlled by &entral +overnment and some by #tate +overnment by levying taes like sales ta, ecise ta, income ta, import%eport duties, property ta, wealth ta, taes on investments in fied deposits if the interest earned is more than 2?,???% per year, taation is either directly or indirectly.
