CREATING AFFORDABLE HOUSES AND …urbanmobilityindia.in/Upload/Conference/3cf78dd4-ba28-4...CREATING AFFORDABLE HOUSES AND COMMUNITIES IN INDIA Lack of affordable housing is highest

CREATING AFFORDABLE HOUSES AND COMMUNITIES IN INDIA

A services oriented model for creating affordable housing projects

“By the time the nation completes 75 years of its Independence,every family will have a pucca house with water connection, toilet facilities,24×7 electricity supply and access” PM Narendra Modi

www.MakeMeBuilder.com

Mentored by

CREATING AFFORDABLE HOUSES AND COMMUNITIES IN INDIAHousing | Water | Sanitation| Energy | Transport | Manufacturing

• Network of independent market and technical experts• Think Tank and consultants focused on socially relevant sectors

Who are we?

• Mentor businesses to create opportunities from Government Policies• Incubate young entrepreneurs into innovative business models

What we offer?

• Foreign investors, consulting-design-construction firms• Developers, contractors, government agencies, entrepreneurs

Who we serve?

Mukul Goel, +91 98 1008 9232, Kavita Singal +91 98 1836 7049, [email protected]



Founder of Three Global Rivers : Mukul Goel

Mukul GoelIndian Institute of TechnologyB.Tech - Civil EngineeringTexas A&M University, USAM.E. Construction EngineeringUniversity of Pittsburgh , USAMBA - Finance

PastEmployers

Real Estate- Emaar MGF, DLF, Adani

Power- Bechtel, Black & Veatch

LocationsWorked

USA, UK, Spain, UAE

India, Thailand

BusinessExpertise

Project Selection , Concept and Planning

Partnership Structuring, Asset Reconstruction

TechnicalExpertise

EPC Project Management, Value engineering

Project Turnaround, Strategic Sourcing

Professional Interests

Smart Cities, Economical and Prefab Housing

Integrated Industrial and Urban Development

+91 98 1008 9232, [email protected]



India’s Housing Problem is in our face and we need to do something about it

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Affordable urban housing market is an immense business opportunity

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Houses Current DemandDemand by 2022

Urban 1.9 Cr 2.9 Cr

Rural 4.0 Cr 2.5 Cr

TOP STATES WITH HOUSING NEEDS

NORTH WEST SOUTH EAST

Uttar Pradesh Maharashtra Andhra Pradesh West BengalRajasthan Telangana BiharMadhya Pradesh Tamil Nadu

Karnataka



Housing Affordability affects developed and developing countries both

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GlobalChallenge

• 330 million familieslive in substandardhousing

• 200 million familieslive in slums

GlobalOpportunity

• Overlookedopportunity bydevelopers

• 100 million homesby 2025 require$200 billion a year

IndiaChallenge

• 40% of India willlive in urban areasby 2030

• More than 1/3 ofthe urban Indiansdon’t own a home.

IndiaOpportunity

• Provide housing forover 65 millionpeople in slums

• Provide housing forEWS/LIG that is95% of shortage



Lack of affordable housing is highest among Urban Poor

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EWS

LIG

MIG

HIG

INCOME

1-3 lakh per year

3-6 lakh per year

6-10 lakh per year

10-20 Lakh Per year

SIZE

30 Sqm

30-60 Sqm

60-140 Sqm

140-200 Sqm

AFFORDABILITY

Price = 3 to 5Yearly Income

EMI or Rent = 40%of Monthly Income

PRICE

3 -10 lakh

10-25 lakh

25-50 lakh

50-80 Lakh

EWS•EconomicallyWeaker Section

LIG•Lower IncomeGroup

UrbanPoor MIG

•Middle IncomeGroup

HIG•Higher IncomeGroup

MiddleClass



Need of alternate delivery models for affordable housing

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Lack of organized players in affordable housing market

Projects marketed as affordable are not affordable

Affordable projects lack amenities and connectivity

Buyers have small savings and irregular income



PM AWAS YOJNA : Collaboration between Center, State, ULBs, Banks, Entrepreneurs

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SlumRehabilitation

• Rs. 1.0lakh/house

New Housing onPublic Land


Self Build/Upgrade


HomePurchase

• Interest subsidyof 6.5%

Enabling Supply : PPP Projects Enabling Demand : Direct benefits

Simplify PPP mechanisms• Extra FSI/TDR/FAR• Relaxed Density Norms• Pre-approved building layouts• Single Window Clearance• No Non Agri approval for residential zone

Loans up to 6 lacs• With qualifying

income criteriaon selfcertification basis

Identify areas• where

redevelopmentproject is notpossible

CENTRAL GOVERNMENT

STATE AND ULBs BANKS



Subway Creates Affordable Sandwiches Restaurant Owners

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MMB Creates Affordable Housing Entrepreneurs

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Land Owners

ConstructionTechnologies

and BestPractices

AffordableHousing

Developers



About Make Me Builder (MMB)

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Engineering andand businessmanagementspecialists

Who are we?Land ownersDevelopersContractors

Our Customers?

Createentrepreneurs whodevelop housingprojects andservices

What we do?A process andbrand thatrepresents trust,quality and value

What we offer?



Profile of Entrepreneurs

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• Monetize land by development with higher valuations

Small Land Owners

• Win government contracts and PPP projects

Contractors

• Improve viability on affordable housing projects

Small to Mid Size Developers

• Entry into a new business

People from non construction businesses



We bring together stakeholders required to catalyze affordable housing

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Strategic Sourcing Access to capital

Convert Land into a Resource

Suppliers• Part Manufacturers• Special Technologies• Contractors• Fabricators

Landowners• Private Landowners• Urban Local Bodies• Public Sector Units• Frontline developers

Financers• FDI Funds• Impact Investors• Financial Institutions• CSR Programs



Entrepreneurs create communities with multitude of revenue generating services

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HOUSING

TRANSPORT

EDUCATION

FOOD

RECREATION

HEALTH

JOBS



Lack of transport is significant deterrent in creating affordable housing offerings

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Unclear timeline oftransport availabilitymakes it speculative

investor

Creating inflation andtransport congestionaround the available

housing stock

Leaves much affordablehousing underutilized till

the transport servicesare provided



Community Owned and Managed Transport as part of Housing Offering

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Prior to arrival of public or organized private transport

Capital Cost financed along with housing construction

Community Cars, Minibus, On demand, Pooled Cars

Financially Sustainable Social Enterprise

Case Studies in UK, Australia and Srilanka



How Community Transport is operationalized

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Technology enabled via smart phones and internet

The majority of the drivers are community residents

Un-organized auto-tempo-rickshaw can complement

Has Concessionary Fares or a membership based programs

Flexible and responsive to needs of the owning community

Feeder service to existing public transport services

Synchronization with public transport systems



Community Transport has many other positive outcomes

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Enable much of the low cost land to be utilized for affordable housing

Will reduce widespread housing inflation

Provide mobility at a significantly less GHG emissions



We address multiple challenges through MMB

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Issues in development of affordable housing

Land Costs prohibitive to affordability

Delays in Statutory approvals

High Cost of Construction and Materials

Loans not available to target buyers

Lack of amenities and mobility

Poor living conditions and maintenance

Strategic Solutions and Ideas

Provide development capacity tolandowners to obviate need to buy land

Leverage special approval provisionsunder Government policies

Economize on scale and volume and useGOI approved technologies.

Create projects eligible for Governmentgrants and subsidies

Generate revenue from amenities andtransport services

Engage local community and NGOs indevelopment and operation



Diverse and sustainable revenue sources

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• Franchise Fees• Management FeesService Fees

• Rental Income from Built-up share• Facility management, advertisement rightsAnnuities

• Sale of Built-up or Land Share• Value enhancement of distressed assetsAsset Liquidation



Our Project Level Business Model

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ProjectSPV

Housing Franchise

Project

Investors LandOwnerIRR

Equity

Brand, Technology Franchise Fees

$$$1

Affordable Housing< Rs 5-25 lakh / unit

Gross Profits

Net Profit

Land

SuppliersContractors

Strategic Sourcing Volume Business



Indicative Term Sheet with and land owner and investor

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Franchisor is Housing Franchise Company

Terms with Franchisee Land OwnerProject Size Minimum 100 units for a single projectProject Duration 2 yearsLand Valuation As per authorized valuersBrand License Fee Fixed Annual Fee irrespective of size of projectDesign Fees Per Unit Housing depending on the number size of the projectProcurement Fees Markup on materials purchased with escalation at pre-disclosed rates

Terms with InvestorsEligible Investors Record of investments in socially oriented projectsFinancial Exit 5 yearsHurdle Rate 10% IRRPerformance Fee 50% of profits over Hurdle RateCash Payout Project cash flows distributed from year 2 onwards when availableDrawdown Rolling {Investors accrue 10% p.a. from the date funds are received)



We apply best practices in all aspects of affordable housing lifecycle

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Land Stakeholders•Single Owner Farmer•Community Owned•Engage NGO, CSR•Government Support

Marketing•Lower Booking Fee•Flexible Payment•Rent to own options•Govt Policies linked

Execution•Technology Driven•Honesty and Passion•Mindset for efficiency•Systematic Organized

Maintenance•Resident led

management•Integrated Utilities•Maintain/Upgrade



Incubate innovative ventures that provide value in the housing development

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Hub ofInnovation

Online SalesPlatform

ProjectManagement

Systems

New Productsfor Housing

ConstructionSystems

VendorDevelopment



Our team structure

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Technical

Architects andEngineers

Procurementand Logistics

FacilitiesManagement

Management

Legal andLiaison

Finance andContracts

ProjectManagement

Marketing

Sales andPromotion

BrandManagement

IT, CRM, WebDesign



Mission for Housing Franchise

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Multi-directionalCapacity Buildingof entrepreneurs

and core team

Pilot ProjectUsing Best

Practices aidedby Government

Programs



Vision for Housing Franchise Company

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Preferred platformfor best available

Affordable HousingSolutions

Leading FranchiseBrand for

Affordable HousingDevelopment





Key developmental parameters in housing development

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Floor AreaRatio

Ratio of Built-up area to land area

DwellingDensity

Number of dwellings per unit land area

Setbacks Empty Perimeter around the building

GroundCoverage

Ratio of covered ground to total ground

Carpet Area Area within the periphery of the wall of the unit



Selecting an Affordable Housing Project Site

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PLOT SIZE Economies of Scale achieved in a larger project minimum 1 Acre ingovernment approved layouts.

LOCATION In newly developing industrial area where highway connectivity ormass transit construction is underway.

ACTICVATION Several other developers have also launched their residential andretail developments projects.

DEMOGRAHICS The population growth in the region is expected to be driven by newlydeveloping manufacturing and logistics facilities.

GROWTH Strong growth in rental demand due to migration of new workers anddesirability of this area due to its clean and organized surroundings.



Recent Initiaves by some Indian States

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UttarPradesh

The Akhilesh Yadav government is planning to build 40,000 more housing unitsacross the state. Various state development authorities will be responsible forsome of the units, while at least 25,000 will be built by private developers.The state government has already given the green light to plans to build morethan 18,000 of the units

Rajasthan Private developers who build a plotted scheme on two hectares of land will haveto earmark minimum 50% for the EWS/LIG. Under provision 3(A), the privatedeveloper will construct flats entirely for the EWS/LIG. The government will giverelaxation on land conversion charges and building approval plan to developersfalling under 3(A). Also, the saleable price can be decided by the developer.Similarly, under provision 3(B), the private developer will develop plots entirelyfor EWS/LIG category.Under provision 4(A) and 4(B), the EWS/LIG houses will be developed ongovernment land by a private developer. Seventy-five percent of suchgovernment land shall be used for EWS/LIG people, while the remaining 25% canbe sold by the developer.



Ministry of Housing and Urban Poverty Alleviation (MoHUPA)

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Leadership in the Ministry• Shri M. Venkaiah Naidu, Minister• Shri Babul Supriyo, Minister of State• Dr. Nandita Chatterjee, Secretary• Rajeev Ranjan Mishra JS, Housing• Sanjeev Kumar, JS & Mission Director – Housing for All

Related Government organizations• Housing and Urban Development Corporation (HUDCO)• Building Materials and Technology Promotion Council (BMTPC)• National Housing Board (NHB)• National Cooperative Housing Federation (NCHF)• National Building Organization (NBO)



STATUS OF PMAY

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626 Cities Selected of 18States

• Andhra Pradesh (40)• Chhattisgarh (36)• Gujarat (30 )• Haryana (9 )• Himachal (13)• Jammu & Kashmir (25)• Jharkhand (14 )• Kerala (14 )• Madhya Pradesh (74 )• Manipur (28)• Mizoram (23 )• Nagaland (19 )• Odisha (42 )• Rajasthan(40 )• Sikkim (8 )• Telengana (28 )• Uttarakhand (61 )• West Bengal (122 )

MoA Signed with 15States

• Andhra Pradesh• Bihar• Chhattisgarh• Gujarat• Jammu & Kashmir• Jharkhand,• Himachal Pradesh ,• Madhya Pradesh• Manipur• Nagaland• Odisha• Punjab• Rajasthan• Sikkim• Uttarakhand

SLNA Established with 18States

• Andhra Pradesh• Arunachal Pradesh• Chhattisgarh• Haryana• Himachal Pradesh• Jammu & Kashmir• Jharkhand• Madhya Pradesh• Manipur• Mizoram• Nagaland• Odisha• Punjab• Rajasthan• Sikkim• Telengana• Uttarakhand• West Bengal

SLSMC Formed with 12States

• Andhra Pradesh• Arunachal Pradesh• Bihar• Chhattisgarh• Haryana• Himachal Pradesh• Jharkhand• Madhya Pradesh• Mizoram• Odisha• Uttarakhand• West Bengal



Special provisions for Foreign Direct Investment in Affordable Housing

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Benefits• No Minimum Capitalization• Repatriation after 3 years• ECB financing permitted• No Min Land Area or BUA

Conditions• 30% total project cost for affordable• 40 % of total FSI used for affordable

• 1/4th for LIG units• 3/4th for MIG units

Source : Ministry of Commerce, DIPP, Press Note 10, 2014 Series



Public Private Partnership Model

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Acquire Land

EstablishConditions andAward Project

GetDevelopment

PermitsSell Allotments

Constructionof Project

Operate andMaintain

Government



PPP Model for affordable housing has not been an astounding success

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Government

• Wants Economic Returns• Wants most economic

solution• Wants same regulatory

approval regime asconventional projects

Developer

• Wants Financial Returns• Wants at least 15%-20%

profit• Affordable Housing projects

cannot afford delays due toapprovals



Affordable Housing Buildings and Spaces must not be Cheap or Low quality or Low technology

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HUMANE

AESTHETIC

DURABLE SAFE

ACCESSIBLE

EFFICIENT



Designs should be space optimized with carefully chosen components

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1 BHK300 Sqft carpet areaRs. 3 to 10 Lakhs

3 BHK flat600 sqft carpet area

Rs. 10 to 25 Lakhs

Only for illustration. Not an actual proposed product.



Group housing formats vary in density and structure heights

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70%

30%HIGH RISE ON LAND

ON OTHER COSTS

50%

50%MIDRISE ON LAND

ON OTHER COSTS

30%

70%LOW RISE ON LAND

ON OTHER COSTS



We must learn from global best practices in affordable housing design

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Unit Design• Space Convertibility• Smart Storage• Minimized Circulation• Zero Door Swing

Building Design• Modular, Prefabricated• Attractive , Economic feel• Efficient climate control• Safe from natural calamities

Master Plan Design• High Density Walkable• Amenities and Recreation• Optimum Street Design• Smart parking

Community Design• Mixed Commercial Spaces• Education and Training• Affordable Transportation• Affordable Health



Government recommends 8 emerging technologies

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Monolithic Concrete Construction System using “Plastic Aluminum” Formwork

Monolithic Concrete Construction System using “Aluminum” Formwork

Expanded Polystyrene Core Panel System

Precast RCC Columns/Beams & Cellular Light Weight Concrete Slabs

Speed Floor System

Glass Fiber Reinforced Gypsum (GFRG) Panel Building System

Factory Made Fast Track Modular Building System

Light Gauge Steel Framed Structures (LGSF)

Compendium of Prospective Emerging Technologies for Mass HousingBuilding Materials & Technology Promotion Council (BMTPC)Ministry of Housing & Urban Poverty Alleviation, Government of India

Documents

CREATING AFFORDABLE HOUSES AND …urbanmobilityindia.in/Upload/Conference/3cf78dd4-ba28-4...CREATING AFFORDABLE HOUSES AND COMMUNITIES IN INDIA Lack of affordable housing is highest