India targets slums with $300 house

India Dispatch: An Indian academic has plans to relieve the country's housing crisis with a $300 house.

Mumbai's urban poor could benefit from the innovative designs to come out of the competition. Punit Paranjpe / AFP

MUMBAI // Three years after the car giant Tata Motors unveiled the world's cheapest car, the egg-shaped Nano, an Indian-born academic has taken it upon himself to build the world's cheapest homes - for just US$300 (Dh1,100) each.

Vijay Govindarajan, a professor at the Tuck School of Business at Dartmouth, recently organised a global design competition for houses of 225 square feet to cost no more than $1.33 a sq ft.

The idea has stunned property developers in Mumbai, India's seaside financial capital where the per square foot cost of construction is $67.

Six winners, whose names are expected to be declared this month, cranked out various prototypes of environment-friendly and fire-resistant houses made of mass-produced synthetic materials such as polycarbonate fibre.

"It's an idea whose time has come," Prof Govindarajan says. "More than any other place in the world, Mumbai needs innovations like these."

In this prosperous, but overburdened city bursting at its seams, more than 60 per cent of the population lives in squalid shanty towns.

Across India, at least 23 million urban families from lower middle-income groups - whose annual earnings range between 60,000 rupees (Dh4,910) and 130,000 rupees - live in similar conditions. Monitor India, a research company in Mumbai, says many of them aspire to live in homes of between 250 and 600 sq ft in the suburbs, but find themselves priced out of India's costly property market.

Prof Govindarajan's innovation promises to change that. It typifies the Indian concept of "jugaad" - a colloquial term used to describe a unique and cheap solution, cobbled together in a resource-constrained environment, to fix a vexatious, often engineering, problem.

In recent years, several jugaad-style innovations have flooded the Indian market, offering new, inexpensive options to India's 1.2 billion people, whose per capita income is about $1,000.

A year after it launched the Nano for $2,500, Tata launched the Swach water purifier, priced at 1,000 rupees. The device operates without the need for electric power, assuring millions of India's poor access to clean drinking water and diminishing the scourge of waterborne diseases. It is a replaceable filter-based product, which is entirely portable and made from low-cost natural materials.

In 2009, General Electric's healthcare laboratory in Bangalore unveiled a hand-held electrocardiogram for $800 - less than half the price of a bulky conventional electrocardiogram. The new gadget reduces the cost of an ECG heart test to as little as $1 per patient.

Legions of small and large Indian enterprises are now focused on creating high-performance technologies affordable for hundreds of millions of people at the bottom of India's economic pyramid. This trend does not reflect the desire to develop cutting-edge innovation as much as the wish to tap a large and lucrative consumer market in India, analysts say.

As India's economy expands, it is being transformed from low-income to lower middle-income. Its per capita income has almost doubled since 1990, moving hundreds of millions of Indians, especially in the country's rural heartland, to the cusp of becoming first-time buyers of consumer goods.

"In a country with a huge population but low average income levels, low-priced products are essential to increase the size of the addressable market," says Rishikesha Krishnan, a professor at the Indian Institute of Management in Bangalore, and the author of From Jugaad to Systematic Innovation: The Challenge for India.

"In many product categories, the demand among consumers in higher-income brackets is already saturated, leaving the innovation of low-cost and competitively priced products the only way to drive growth," he says.

In India's villages and small towns, home to 742 million people, a surge in consumption has occurred in recent years despite residents' minimal earnings. The market is pushing retail demand faster in rural areas than in urban areas, according to India's Associated Chambers of Commerce and Industry, accounting for more than 60 per cent of the national demand.

Prof Govindarajan says his $300 home would not just improve the quality of lives for millions of poor people, but also create a unique $375 billion business opportunity for property developers worldwide.