The $300 House: One Year Later
Tag Archives: Vijay Govindarajan
Thursday February 24, 2011
by Sunil Suri
Editor’s note: This post is one in an occasional series on Vijay Govindarajan‘s and Christian Sarkar’s idea to create a scalable housing solution for the world’s poor. Each post will examine the challenge from a different perspective, including design, technology, urban planning and more. Today, Sunil Suri offers a way to scale Class-A housing in densely populated areas.
At this point, the commercial viability of a market-based approach to providing good quality housing in urban areas at prices affordable to low income customers is beyond question. But at the very bottom of the pyramid, the poorest of the poor are still not on the radar, or they weren’t until the concept of the $300 House was introduced.
One challenge not yet addressed in this blog series is that the urban challenge. Slums by their nature are located where land and space are limited. I suggest that rather than leading with “how do we build this house” it’s better to come up with “how can we create an affordable means of acquiring property” and only then deciding what that property looks and acts like.
In India, our proposition is to offer low entry costs (we could, in the extreme case, offer homes free up-front), and realize our investment from the annuity of captive consumption. The key is not in clever house designs — though, to be sure, a good design will be critical — but rather in creating an ecosystem that fosters permanent residency. The value of the annuity derived from the “margin” produced from consumption of utilities (produced on-site and off-grid using all green, carbon-neutral systems) and the daily needs for goods and services is so powerful that, properly modulated, it can be used as a subsidy to deliver very-low cost or “free” homes.
Achieving Global, Low-Cost, Class-A Construction Building off US-inspired steel-based technology, we believe that it’s possible to design, build, deliver, and erect affordable multi-tier tower housing, addressed squarely to lower class sections of the Indian demographic. Nominally Class-A construction that costs us $200 per square foot here in the US, we can “build” for $25 per square foot in India. Cost compression comes from:
- sheer scale of the number of units being produced (the US just does not have the population density, whereas India, China, Mexico, Brazil, do).
- building first in a factory, which is highly automated.
- using standardized components.
- inverting the design scheme .
What does that last point mean? Traditionally an architect designs something that’s then built. We start with a template, an optimized structure — in our case a 14-floor tower with a 16,800 square foot footprint that would include two kinds of dwellings, an 800 square foot, 2-Bedroom unit and a 1,100 square foot, 3-Bedroom unit, with an ideal mix of 85% floor efficiency — around which an architectural solution is added as a second step.
By reversing the normal process, we can build standardized systems on a factory-floor with rapid on-site erection. Because of that, we can finish a Class-A structure inside of 10-days per floor for a 14-floor building, versus the traditional scheme of consuming 36-months using cast-in-place concrete or masonry.
The economics work: Trading the $25 per square foot upfront cost (plus a cost for the land and the infrastructure) for the annuitization of the “margin” gained (in many cases this is an EBITDA of about 40%) from daily consumption (which may well be $300/year and per capita), is an easily fundable proposition, especially if it can be harnessed from a 40- to 100-year tenured residency.
This development plan can be scaled to build 3 million or 30 million units per year, if needed. A 60,000 square foot factory floor, employing about 200 reasonably skilled and trained people, equipped with many automated CNC machines, turners and robotic-welders can produce about 3,000 home units per month in a one-shift work modulus. The basic input for all systems is rolled-steel, tubes and flanges, nominally available from almost any steel-manufacturer at a very competitive price.
The Use of Available Technology The technology for this urban “design-build” structural approach has already been proven. It has been successfully used in over 20 projects throughout Northern California including two residential projects currently under development. The picture reproduced below is one example of a completed development using this system.
Steel HSS (hollow structural sections) columns, wide flange beams and connectors for this steel frame system are manufactured in factories, as are all of the components that make up a finished “building,” which are completed as “pods” complete with plumbing, electrical, fixtures and even woodwork included. These pods are then erected in the field in order to minimize structural deficiencies and significantly accelerate the development timeline.
In the field, the design uses unique connectors that allow “snap-on” construction between a male-end and a female-end, drastically reducing bolting and welding time. The three dimensional structural grid that results from this assembly method creates a highly redundant, seismically-sound and blast-resistant structure. The finished pods also snap-on to the structure, and then are interconnected with each other to yield a finished floor. Exterior cladding can be almost any light-weight material. In India we propose using synthetically derived granite.
If all this sounds complicated or technical, think of it this way. The entire thing isn’t unlike putting together giant Legos.
Alternative Energy as the Standard The technology to power these developments is also now available on a global basis. Sustainable design components like the US LEED standards should be incorporated into these affordable housing developments. Photovoltaic cells will be used to power the majority of the lighting and unit appliances throughout the residential towers. An array of copper pipes or tubes contained within a curved metal housing will be applied to the rooftops and used to heat water. For structures in a hot climate, solar systems provide an incredibly efficient heating, cooling, and power solution at a very low cost, especially when applied to new construction.
A network of small size (micro wattage) wind turbines will also be installed (pictured below), on the roofs of each tower, and these are used to complement the energy produced from photovoltaic’s and wide angle PV collectors, creating a hybrid energy system that covers opposite extremes of the climate spectrum.
Solid Waste Treatment centers at each development site (located in a on-site “utility park”) will lead composting efforts and remove contaminants from household sewage from which the reusable elements will be converted into biomass, greatly minimizing the amount of waste that is actually discarded. The biomass created will be burned as a biofuel and serve as a renewable energy and heating source for the development.
Innovative wastewater technologies will be used in several forms to create a fully recyclable, near zero water system at each development. Rainwater harvesting and wastewater treatment systems will be implemented to catch, store, treat and reuse water.
The Preservation of Community In addition to building residential housing, we’re looking at building a self-sustaining community which includes township amenities such as shopping and retail areas, commercial office space, a community center, an ambulatory-care, full-service medical clinic, educational centers & schools, and a transportation hub for access to the heart of the city using pooled transportation. The proposed development (illustrated in a site-plan below) is about 55-acres, and is located some 60Km from the heart of a major city. It will house approximately 5,600 residents. About 600 people will be employed on site, and at prevailing wage. The nearness and the distance from core, in India, provide the most optimal cost attribute for land, and yet allows the developer not to be materially impacted by incumbent development norms, which may be a) restrictive and b) suited to the single asset-development scheme.
Of course, the political and cultural issues are key to successful implementation. In developing countries like Brazil, for example, we are seeing the resounding positive effects of Bolsa Familia, a social program which has changed the economic demographic of the country. Poverty has fallen from 22 percent of the population to 7 percent between 2003 and 2009.
This effort must be replicated in other developing countries as well. We must see a stronger emphasis on joint public-private solutions if the real human needs at the bottom of the pyramid are to be addressed.
Let’s start with affordable housing.
Sunil Suri is the founding principal of Menlo Capital Group, a developer, owner, and manager of real estate in Northern California. Among his early projects are some of the first high-rise buildings ever to be constructed in Silicon Valley.