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The Business of Prefabricated Structures

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The use of prefabricated structures is on the rise which means more convenience to the consumers and good business for entrepreneurs.

Building concrete structures is time-consuming, thanks to the number of steps involved right from sourcing the raw material to giving the finishing touches.

This becomes a big problem especially if the requirement is immediate. However, since last four-five years, India has been introduced to a solution to this problem in the form of prefabricated structures, or prefab in short, more popularly known as porta cabin.

Prefab structures (read Porta Cabins) are dwellings manufactured off-site in advance, usually in standard sections that can be easily shipped and assembled on site and are designed and built to be movable rather than permanently located.

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Quality expectations in prefab are also changing. Now, customers even want air-conditioned and dust-free cabins, as computers are also being used in there", says V Kumar, owner, Porta Cabin Corp, a big ticket prefab vendor.

The target market and the major segments
All the major PSUs, many government departments and ministries, defense establishments and diplomatic missions, major private sector companies, elite schools, big hospitals, top hotels, biggest builders and airline companies use prefab structures. The bigger prefab vendors like Porta Cabin already have impressive client lists, which are any small player’s envy.

13 hrs flat
In UK, McDonald’s restaurants use prefabrication technology to build their new outlets, and they recently set their record of a completed outlet being built and open for business within 13 hours of starting construction on prepared ground works. This has considerable commercial implications for businesses and a range of prospective clients in India, which could be hotels and retail outlets who are using some form of prefabricated procurement.

The major segments in prefab business are:

I. Buildings: Companies that are starting projects need project site office before any minimal construction activity can be started, for accommodating their workforce

II. Residential/Individual: In places, where government/municipality does not/cannot allow pucca construction, e.g., Near Qutub Minar, prefab structures are widely used. It includes rooftops where Municipal corporation does not allow construction beyond a maximum height and farmhouses on riverbanks

III. Security Requirements: As a newly emerging option for defense and security arrangements, there is a need for control rooms, bulletproof cabins, CCTV monitor rooms, and strategic customized security structures on rooftops of important buildings

A large amount of business also comes from places having difficult terrains, meaning it’s not a metro-focused market.

Why has prefab gained popularity lately?
Prefabricated systems have been popular in India only recently because due to very poor labor remunerations; the system of wet (in-situ) construction is cheaper than prefabricated mass-produced systems. However, Brijesh Sharma, Triveni Electrofab, says, "These have been used since many years by the likes of Paramilitary forces and PWD. It’s the private sector that is embracing it only now which makes it a fashionable commercial item."

List of products which are being/can be offered in prefab
Site Office/Accommodation Portable Class Rooms Small Hospitals
Bathrooms Camp Site Terrace Rooms
Beach Houses Security Rooms Cellular Phone shelter
Farm Houses Bunk House Modular Cabin
Portable Toilet Guard Rooms/ Post Clinics
Roof top Hotels Huts
Barracks Portable Kitchen Cold storages
Exhibition halls kiosks Workshops Warehouses
Extended accommodation Disaster Relief Shelters Low Cost Housing
Storage Shed Transit Camps Resorts & Hill Cottages
House (one to three bedrooms) (Up to) three-storey house

What differentiates it from traditional rivals?
Prefabricated structures can be assembled at a site with high speed. For instance, around 1,000 sq. ft. can be erected on site in approximately two to three days. These structures are sturdy and have life of approximately 30 years, which is comparable to any on-site built structure. The materials used include wood, PVC, Cement Fiber Board (CFB), and GI (Galvanized Iron) sheet panel, with varying thickness.

Size of market and earning potential
"Small firms can do a business of around Rs 5-6 crore per year, selling about 200-250 porta cabins of price range Rs 500-1500 per sq. ft.", says Ankleshwar Nanchahal, Director, Tinnycraft. On a higher scale, there are companies like Porta Cabin who sell 6000-8000 porta cabins per year, with 80 percent of the clientele being the corporate market. One thing to take care of is that this business is seasonal in some aspects.

Competition
The market is untapped to the extent of 60-80 percent, with lesser competition on bigger scale. "There are very less companies that offer expertise in the market. In reality many companies don’t offer prefab themselves but outsource it to companies like us who actually have the expertise," says Nanchahal. Most of the small firms are engaged in installing prefab units bought from the suppliers. It’s only the bigger companies that have their manufacturing facilities.

Source of raw material
There is no dearth of raw materials. Apart from Chinese imports, Indian companies like Everest Industries, NCL Industries (Nagarjuna Group) and Tata Steel manufacture the materials used in prefab construction.

Industry-specific issues
Some of the problems faced by prefabricated house vendors in India include lack of familiarity of the consumers, impression that design choices are limited with prefab structures, perceived cost premium for quality prefab, lack of flexibility in on-site design changes. The others include opposition from construction workers and contractors who may perceive threats to their jobs from prefab units; prefab styles often cater to a niche market and have limited initial appeal.

Barriers to entry and growth
Barriers to prefabrication are presented from the perception resulting from past mistakes. These include lack of trained work force for installing prefab units; lack of prefab resources close to the building site; the consumer is either not familiar with the concept or does not desire it and stricter guidelines being used by money lenders to assess prefab home loans. There is the perception that prefabrication offers a non-permanent solution.

Innovations in prefab market
Some people have brick slips mechanically fixed to the outer surface of the structure’s wall in an attempt to mimic the traditional finish. Besides, even containers containing the equipments and other things like AC, generators, computers which are required on a project site, which are wholly transported there, are being made of prefab material. The innovation factor has been market driven in the prefab industry. Now, instead of only plain porta cabins, there are also toilets and pantries made of prefab. In Rajasthan, Porta Cabin Corp has even made cabins which provide office space during the daytime and sleeping place during the night.

Socio-economic impact of Prefab on India
Prefab is already making waves in the education sector as companies like Sintex are providing prefabricated classrooms to government-funded education scheme – "Sarva Shiksha Abhiyan" wherein there’s a shortage of six lakh classrooms. Sintex has already received approval from 16 state governments, owing to its large scale geographically diversified manufacturing facilities, leading to lower costs.

These structures can also be used for mass housing in disaster situations, for defense personnel in difficult terrains and mass housing of labor force and slum dwellers by companies.

Investment and ROI in starting a prefab selling firm
In this business, working capital is required more than the fixed capital. One can start a prefab selling unit with about Rs 50 lakh constituting fixed capital and working capital. There is a minimum profitability of approximately 10 percent which can be increased overtime through acquiring bigger clients and moving up in the value chain of products.

Advantages of prefabricated structures
- Good weather resistance - Easy and fast to fabricate
- Knock down system and easy shifting - Fire Retardant
- 100 percent water proof - Anti Termite
- Anti fungus - Anti Corrosion
- Very low maintenance cost - Resistance to chemical
- Aesthetic Design - Light weight, high flexural strength and impact resistance
- Low cost (vis-a-vis time cost) - 50 percent less water used for construction of a typical house
- 50 percent less use of quarried materials used in the construction - At least 50 percent less energy consumed
- Feasible subsidies from government for GRIHA rated green buildings/ structures - Lesser legal issues
- 50 years warranty (for houses in India, in most cases)

Prefab Homes
Though its a small segment, but being the latest fad, options are available for primarily those who have big space and can spend money, and above all have the fetish for it.

Major constraint for prefab homes is that they cannot be built beyond one to three floors. The cost of construction is Rs 1500 -7000 per sq. ft., which is additional to the cost of land.

The companies that are offering prefab homes have little customization to offer to the nascent Indian market. They offer prefab houses that are of standard sizes at high prices irrespective of space availability with the customer. Globally, companies like Ikea (furniture giant) and Toyota (Automobile giant) are entering prefab housing business and doing very well.

Then we also have prefabricated houses made of engineered bamboo that have certain other advantages. They can be packed flat and transported long distances at a reasonable cost. They are better designed and environmentally friendly. Bamboo materials are widely available and can be cultivated at a low cost. For those who can afford, there are wooden homes as well as wooden floors, for which there has developed a sudden liking.

The prefab market is wide open for companies that can come up with marketable solutions to the design, supply, and cost issues. If you want to be innovative in the construction sector and want to
add glamor factor, this is the business to be in.

Comments (7)Add Comment
Very well written
written by JACKIE STRONG, February 11, 2011
this is a nice article about the structure of the prefab structure of any business
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written by prefabrik, September 14, 2010
Great projects.We making too this prefabricated products in Turkey.

Thanks..
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Good article, but your grammar needs a lot of work
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Good article, but your grammar needs a lot of work.
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