Working in the insane hustle and bustle of a metropolis like Mumbai is a unique experience, and it brings with it an opportunity to witness the dynamics of this rapidly urbanizing world. As I travel every day to my office, I see what is arguably the most expensive residence in the world along the way. The residential property prices are exorbitant at the prime locations of this city. 180 units sold in Mumbai from January to March 2011 were priced above an average capital value of Rs.20,000/sq ft. No wonder that the market is slowing down perceptibly now. Around 3,350 units priced at Rs.20,000/sq ft and above remained unsold by the end of March 2011 in the city.
Paradoxically, on the same street I travel on every day, there are also homeless people who spend their nights on the road or in the parks. Nearly half of the population in Mumbai lives precariously in the numerous slums that dot the urban landscape – sans the basic habitation needs of running water, power or sanitation. Mumbai is representative of the fact that India is at the crossroads of two distinct civilizations; both real, and both competing with each other for the world’s attention.
The Government of India has put the figure for the housing shortage in urban India at a staggering 26.53 million units in the Eleventh Five Year Plan 2007-2012. Recognizing the need to increase home ownership and reduce slum creation, the Government is now championing its vision of Housing for All. Several low cost mass housing schemes have already been undertaken for urban areas, one of them being RAY – the Rajiv Awas Yojana. RAY provides financial assistance for the construction of houses for people in urban India below the poverty line. The unit cost under Indira Awas Yojana, which is the flagship rural housing scheme, is Rs. 45,000 (approximately $1,000) per unit.
That’s the price of a flight ticket from Mumbai to New York, a Digital SLR Camera or a laptop. Equate that with a house providing a livable space of 250 sq ft for a family. Is this possible?
It will require an innovation breakthrough in existing construction technology. The process of disruptive innovation encompasses the development of a product that disrupts the existing market, in ways that neither the consumers nor producers expect. Propounded by Clayton Christensen, the theory has found numerous examples in present day India, from the cheapest commercial car in the world (Tata Nano at $3000) to mobile phones that provide battery backup of 30 days (Micromax). A radical techno-financial revolution employing large economies of scale can enable affordable housing solutions for numerous urban cities of the developing world.
The ‘1K House’ project is a unique and visionary project underway at Massachusetts Institute of Technology’s Centre for Real Estate, where students are attempting to design a low-cost affordable house for people worldwide who face extreme poverty. With a target to limit construction costs to $1,000, its relevance for housing projects in India is remarkable.
The team has already achieved construction cost of housing prototype benchmarks of $1,800 in China and $2,000 in the Philippines. Lowering the bar even further is another challenge being taken up by the Harvard Business School (HBS). Initiated as an idea by Prof Vijay Govindarajan from this august institute, a competition to design a $300 House has been sponsored by Ingersoll Rand. He has propounded several novel themes to enable this – from reverse innovation and micro-grids to collaborative consumption.
I believe that several solutions will emerge, and that the one which will finally succeed will entail an altruistic blend of people, planet and profits.
The author, Himadri Mayank, is Manager – Research and Real Estate Intelligence Service, Jones Lang LaSalle India
