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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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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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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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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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• 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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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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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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PEST ANALYSIS

POLITICAL ECONOMIC SOCIAL TECHNOLOGIC

AL
• Building • Fluctuations in • Credibility • Pre-structured
Commencement prices of inputs of the Concrete
Certificate • Changes in company/fir Blocks: Like
• Floor Space Index demand m modular
(FSI) • Future Growth • Perceived Kitchens
• Occupation & Resale Value Image of the • Mixture of
Certificate • Stamp Duty & property Cement and
• BMC Developing Registration developed Sand
Plans • Greater • Building • Self service tech
• CRZ (Coastal affordability on Facilities – buy home
Recovery Zone) account of low • Image online
• TDR (Transfer of interest rate Factor • Quake resistant
Development • Income levels • Earlier joint • Lifts, security
Right) of the people families so gadgets
• Higher bigger • Rain water
disposable houses now harvesting
income nuclear • Concealed
• Stable property families lighting
prices • Move to • Material used
• Increased urban from for interiors of
urbanization rural good quality
• Fiscal • Self
incentives of sufficient
housing complexes
to make life
• Economic
easier
conditions of
the country

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

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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 set-
up 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

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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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