8) Housing And Construction

TYBMS - SEM V - SSM Compiled by Kripa Kalro

SECTOR 8: HOUSING AND CONSTRUCTION SERVICES CHAPTER CONTENTS:

 4 Characteristics  Innovations  Technology  Users  Segmentation  8 P`s  PEST Analysis  Additional matter 4 CHARACTERISTICS OF HOUSING INDUSTRY 1) Intangibility: Services are said to be intangible i. e. they cannot be seen or tasted. Hence, it is difficult for a consumer to perceive the advantages and disadvantages, if any that are associated with the service- offering. Intangibility also means that the consumer cannot own an offering, it can only be experienced. In the case of the housing industry: Pre construction stage Services offered in the pre- construction stage are of highly intangible nature. This is because the services of consultants (viz. for soil- testing, zone- mapping etc.) is free from any product and has credence qualities and weightage of reputation. Examples-structural design provided by structural/civil engineer, services by an architect etc. Post construction stage As against the above, service- products offered during the post- construction stage are linked to tangible goods. It follows the sale of goods, in this case a house, and there is no guarantee that the service is required immediately after sales. Such services are a part of the TPC and are used for product differentiation. Examples: a gardener’s services for landscaping gardens, plumbers/ electricians for MRO, Utilities like security, fire alarm, power. 2) Inconsistency: Service transactions take place when people are the customers and when people are the providers. Since services include people, and people have different back- grounds, attitudes, skills, moods and experiences, services are usually inconsistent.

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TYBMS - SEM V - SSM Compiled by Kripa Kalro In case of housing sector, 2 houses may have the same basic layout but the interiors, designing etc may differ. Many tangible elements like furniture and decoration is different from house to house. 3) Inseparability: As mentioned earlier, services are produced and consumed at the same time. This means that both the service- provider and consumer should be present at the time of transaction or else the transaction would not take place. This implies that the service- marketer has the additional responsibility of getting the service- provider physically close to the consumer. In the housing sector production is first completed and then selling takes place. But in case of some builders, they customize the house according to customer requirements. In this kind of service the customer is involved in the production system as there are discussions held between the builder, architect as well as the customer. 4) Perishability: Service- products or offerings cannot be stored. Unlike goods, where consumption follows production, service- offerings are produced and consumed at the same time. If by any circumstances the service is not consumed then it loses its value. The marketer can never regain his lost revenue. Various services that are connected with buying a house such as services of a real estate agent, architect, designer etc are over once the customer purchases the house. If a house is not occupied, for any reasons, then it is an opportunity that is lost by the builder. INNOVATIONS IN HOUSING INDUSTRY • Multi Complexes • Self sufficiency in the society (infrastructural facilities like temples, churches, etc) • Theatres, Club Houses, Swimming pools, gyms • Rain water harvesting • Solar panels used in construction • Car lifts • Underground parking • Garbage treatment TECHNOLOGIES IN HOUSING INDUSTRY • Wi-fi • Security systems and Fire Alarms • Smoke detectors • Natural calamity resistant foundation and structure • Quake resistant houses USERS OF HOUSING INDUSTRY There are 2 end users: 1. CONSUMERS: Those who purchase the flats for their own personal use 2. B2B and Industrial: Many companies build complexes meant only for their

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TYBMS - SEM V - SSM Compiled by Kripa Kalro employees these are popularly known “staff quarters”. Eg. Railway quarters MARKET SEGMENTATION FOR HOUSING The segmentation of the market for the housing industry can be done on the basis of needs and requirements of the buyers. Thus an area can be classified as commercial, residential or recreational. Segmentation can also be done on depending on the income level of the people residing in the area viz. elite lass, upper middle class, and middle class and lower class residential areas. The facilities and amenities available depend on the area. Family size and other requirements also can be used as a base for segmentation- a large family will require a house with many rooms whereas a smaller family may want a house with lesser number of rooms. Segmentation will help the builders and constructors to effectively market their services. SEGMENTATION ON THE BASIS OF NATURE OF DEMAND Demand for construction projects may be: • • •

Derived, which means that work is created in response to political, economic, social and community and hospitals. Creative, whereby these facilities are commissioned as part of the new development or regeneration programmes to try and encourage further economic activity. Progressive, which concerns refurbishment and upgrading, and this also applies to the purchase of building materials at a consumer levels.

ISM/ 8 P`s WITH REFERENCE TO HOUSING I.PRODUCT LEVEL

CONTENTS

EXAMPLE

CORE

Basic

Permanent accommodation

EXPECTED

Basic+ minimum conditions

Room, Bathroom, kitchen, water supply, water and electricity, Security, cleanliness AUGMENTED In addition to expected Security systems, Good ambience and cleanliness, recreational amenities, social infrastructure POTENTIAL Exceed expectations. BeyondSchools, hospitals and temples/ the usual churches/ mosques in the vicinity. Loans and lower rates

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Service Flower

CORE PRODUCT: in housing sector, the core product is accommodation and the cost involved is 70% whereas the impact is 30%. PRODUCT SURROUND: these are the add on values in addition to the core service which provide delight to the customers. For eg. 24 hours water and electricity supply, phone lines and intercom facilities etc which involves 30% cost though its impact is very high on the customer’s i.e. 70%. II.PRICE Cost Based pricing: Capital projects and building activities are priced so that variable costs – the costs incurred as the result of gaining the work – are covered. Ideally, the price also makes a contribution to the fixed cost/total cost of the contracted organization. It is also necessary to consider charges incurred by the contractor as result of having to underwrite the project from inception to delivery and from the need to acquire any specialist equipment and expertise necessary. Price Discrimination Product: different types of houses are priced at different rates. For eg. Bungalows, apartments, chawls are priced differently. Builder’s also fix prices for different size apartments in the same building. Location: at different locations within the same area or same city ,the prices of property are different. Eg: a house at borivali costs different than a house at nariman point.

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TYBMS - SEM V - SSM Compiled by Kripa Kalro Time: depending on the fluctuating property rates the builder sets the prices of the building. Eg: property rates prevailing today are much higher than those that were 2 3 years back. Pricing is also done depending on the income levels of the customers. Particular income level people will choose a particular area according to their budget. Price is based on the combination of:      

What the market expects What the client can afford The nature of competition in the sector What the contractor can afford to work for Any specific factors concerning the particular job e.g. location material used What is being agreed and paid for- whether completion of a bldg or wider process offered supported by maintenance, pre sale and after care agreements?

III.PLACE Channel of distribution: AGENTS AND BROKERS Product has to reach to the ultimate buyers, so company works with its intermediaries to bring their product to their market. Marketing channel performs he work of moving the goods from the producers to the consumers. In the housing and the construction industry, constructions cannot be transferred but here intermediaries (agents) transfer information to distinct places about the availability of accommodations so that people not having any idea about these constructions get to know about it distribution is done . Market coverage strategy: EXCLUSIVE DISTRIBUTION In the housing sector, every builder sells flats through his own outlet and not through other’s. He has his own appointed company’s agents who do the distribution as per the builder’s orders. IV.PROMOTION The overall purpose of promotion is: • •

Building, developing and enhancing reputation and confidence; Presentation of achievements, capabilities and expertise, and relating two to the needs and wants of customer and potential customers, the key is to use the language media – especially the language of the receiver (both client and potential client and also within the industry), and to develop the media within organization so that expertise and capability are shown in the best possible light in the eyes of receivers.

PROMOTION MIX

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TYBMS - SEM V - SSM Compiled by Kripa Kalro •

•

• • • • •

ADVERTISING: General advertising especially in the trade press to ensure continuing general awareness. From time to time some construction companies- have engaged in television and radio advertisement. Many organizations also include leaflet inserts in the trade press as part of their advertising efforts PERSONAL SELLING: This is targeted at client, potential client and others capable of using the distinct expertise on offer. It involves opening up client fact – to – face contact with those responsible for commissioning work and inviting tenders and presenting the distinctive expertise on offer in the client’s best interest. In the construction industry direct sales / personal calling is also a key feature of brand building and of building and maintaining positive and enduring good quality channels of communication Billboards, hoardings and also on the perimeter fences and gateways to project site Attendance at trade, professional and regional fairs and exhibitions Making most of positive media coverage: Other forms of general positive public relations activities: This normally means more general work underpinning the determination to be good corporate / community citizens. The current activity that comes under this heading at present includes general support for schools, colleges and universities and contribution to the general amenities to communities.

V.PEOPLE The people in the housing and construction industry can be divided into two groups. 1) Those who develop the product: They consist of location hunters’ architects and builders. 2) Those who market the product: These consist of marketing people who may or may not have a civil engineering background but certainly have the skills of understanding the customer as well as the product.

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TYBMS - SEM V - SSM Compiled by Kripa Kalro ROLE OF EMPLOYEES Primary role: The core role is to develop the building. i.e. builder, contractor. Facilitating role: The workers help in constructing the building hence they are the facilitators. Ancillary role: eg. Interior designer, architect etc. VI.PHYSICAL EVIDENCE

VII.PROCESS Stages in Process:   

Pre-Transaction Stage: Checking online the property rates, brochures, contacting the agent Transaction Stage: Meeting with the agent, negotiating, payment, negotiation on maintenance, garage, documents of NOC, OC. Post Transaction Stage: Maintenance, security, setting up the home

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TYBMS - SEM V - SSM Compiled by Kripa Kalro

BLUE PRINT OF HOUSING

VIII.PRODUCTIVITY AND QUALITY With reference to Raheja Construction: RELIABILITY Rahejas – know their construction will be excellent Delivery of house on time ASSURANCE

Trust the big names Security, fire alarms

TANGIBLES

Gate of bldg, surrounding area, park, car park, Lobby, Lift, Brochures, Menu, Tables

EMPATHY

Interior designer, architect, watchman knowing residents

RESPONSIVENESS

Real estate agent, plumber, electrician of bldg come immediately

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TYBMS - SEM V - SSM Compiled by Kripa Kalro

PEST ANALYSIS POLITICAL

ECONOMIC

SOCIAL

•

•

•

• • • • •

Building Commencement Certificate Floor Space Index (FSI) Occupation Certificate BMC Developing Plans CRZ (Coastal Recovery Zone) TDR (Transfer of Development Right)

• • • •

• • • • • •

Fluctuations in prices of inputs Changes in demand Future Growth & Resale Value Stamp Duty & Registration Greater affordability on account of low interest rate Income levels of the people Higher disposable income Stable property prices Increased urbanization Fiscal incentives of housing Economic conditions of the country

•

• • •

• •

Credibility of the company/fir m Perceived Image of the property developed Building Facilities Image Factor Earlier joint families so bigger houses now nuclear families Move to urban from rural Self sufficient complexes to make life easier

TECHNOLOGIC AL • Pre-structured Concrete Blocks: Like modular Kitchens • Mixture of Cement and Sand • Self service tech – buy home online • Quake resistant • Lifts, security gadgets • Rain water harvesting • Concealed lighting • Material used for interiors of good quality

ADDITIONAL MATTER 1) NATIONAL HOUSING BANK (NHB) The National Housing Bank (NHB) was established on 9th July 1988 under an Act of the Parliament viz. the National Housing Bank Act, 1987 to function as a principal agency to promote Housing Finance Institutions and to provide financial and other support to such institutions. The Act, inter alias, empowers NHB to: » Issue directions to housing finance institutions to ensure their growth on sound lines » Make loans and advances and render any other form of financial assistance to scheduled banks and housing finance institutions or to any authority established by or 9

TYBMS - SEM V - SSM Compiled by Kripa Kalro under any Central, State or Provincial Act and engaged in slum improvement and » Formulate schemes for the purpose of mobilization of resources and extension of credit for housing OBJECTIVES OF NHB: NHB has been established to achieve, inter alias, the following objectives: a. To promote a sound, healthy, viable and cost effective housing finance system to cater to all segments of the population and to integrate the housing finance system with the overall financial system. b. To promote a network of dedicated housing finance institutions to adequately serve various regions and different income groups. c. To augment resources for the sector and canalize them for housing. d. To make housing credit more affordable. e. To regulate the activities of housing finance companies based on regulatory and supervisory authority derived under the Act. 2) HOUSING AND URBAN DEVELOPMENT CORPORATION (HUDCO) Incorporated on 25th April 1970, HUDCO was an expression of the concern of the Central Government in regard to the deteriorating housing conditions in the country and a desire to assist various agencies in dealing with it in a positive manner. The principal mandate of HUDCO was to ameliorate the housing conditions of all groups and with a thrust to meet the needs of the low-income group (LIG) and economically weaker sections (EWS). OBJECTIVES OF HUDCO: ·To provide long-term finance for construction of houses for residential purposes in urban and rural areas and finance or undertake Housing and Urban infrastructure development programmes in the country. · To finance or undertake, wholly or partly, the setting up of the new or satellite towns. ·To subscribe to the debentures and bonds issued by the state Housing and Urban Development Boards, Improvement Trusts, and Development Authorities etc. especially for the purpose of Housing and Urban Development programmes. · To finance or undertake the setting up of industrial enterprise for building material. 3) MHADA Maharashtra Housing & Area Development Authority (MHADA) was constituted in 1977 with an aim to extend fair housing opportunities to the residents of Maharashtra. The setup of this premier Housing Authority in India marked the realization that the demand on the Real Estate and Mumbai Properties had been increasing rapidly. Considering the growing competition in Mumbai Real Estate, Maharashtra Housing & Area Development Authority (MHADA) has strategically altered the housing scenario to cover the entire Maharashtra. Moreover, it functions by inculcating corporate efficiency and prompt administration, and accordingly, was formed out of The Maharashtra Housing Board, The 10

TYBMS - SEM V - SSM Compiled by Kripa Kalro Vidarbha Housing Board, The Mumbai Building Repair and Reconstruction Board, The Maharashtra Slum Improvement Board. Owing to this functional categorization, Maharashtra Housing & Area Development Authority (MHADA) has been able to offer the housing facilities in a successful manner. What makes MHADA commendable is the strategic management of resources in order to offer houses in the suburbs and areas in Mumbai like Majaswadi, Chandivali, Oshiwara and Powai. The Maharashtra Slum Improvement Board was constituted in 1974, with intention to provide basic amenities, such as water taps, drainage, pathways, latrines and streetlights etc. in slums. To begin with, its activities were confined to the Mumbai City and Mumbai Suburban Districts. These activities were later extended to the other parts of the State. The Maharashtra Housing & Area Development Authority (MHADA) has been established by the Maharashtra Housing and Area Development Act, 1976. It came into existence on 5th December 1977. At present MHADA is co-ordinating and controlling the activities of seven regional housing boards, setup for each revenue division in the state viz. Mumbai, Konkan, Pune, Nashik, Nagpur, Amravati, Aurangabad and two special purpose boards viz. Mumbai Building Repairs and Reconstruction Board and Mumbai Slum Improvement Board. 4) FIXED AND FLOATING LOAN RATE A fixed rate loan is really simple. You take a loan of a particular amount. The company fixes a rate of interest. You pay back the loan over the number of years that you have agreed on when you take the loan. Since the interest rate remains fixed, your Equated Monthly Installment (the amount you pay back each month) stays the same. No surprises. No changes. A floating rate loan is also referred to as adjustable, variable or flexible interest rate loan. In such a loan, the interest rate keeps changing. So, the interest rate on your loan will go up or come down depending on how the interest rate in the economy is moving. This, in turn, will impact your EMI. Here is how it works: The home finance company will decide upon a base rate - known as the floating reference rate. This is generally based on their internal base rate (which every finance company has) called the retail prime lending rate. The interest rate on your loan will be benchmarked against this internal base rate. The HFC decides how often the interest rate on your loan must be changed. It could adjust the interest rate every year, every six months or every quarter. The more frequently a change is made in the interest rate, the closer it is benchmarked to interest rates in the economy. Assume your HFC 'adjusts' the interest rate once a year at, say, the beginning of the year. Depending on whether or not the base rate has increased or decreased, your EMI -- or the tenure of your loan -- will accordingly rise or fall the next year. In India, most HFCs do not have a transparent method of fixing their floating rates. As you can see from above, the rates are linked to specific internal rates of the HFC which are totally within their control.

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TYBMS - SEM V - SSM Compiled by Kripa Kalro

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