6.5 Billion. That is the number of people, globally, who will be residing in urban areas by 2050. As the standard of living rises day by day, the gap between the rich and poor is widening proportionally. Urban poor are the ones who suffer a massive hit in terms of accessing basic life needs like food, clothing, shelter and energy.
Rhea Silva, a young entrepreneur from Mumbai, is doing her bit to solve the housing problem of the urban poor through Chototel. Chototel is a super budget hotel, which will offer rooms to working class Bottom-of-the-Pyramid (BOP) who wish to stay in a particular region for a longer period of time due to availability of work.
Rhea Silva Founder and CEO of Chototel has joined us to shed some light on the concept of this project, which is built with a single purpose- to make housing affordable for the urban poor and to be a catalyst in ending homelessness.
Thank you for joining us Rhea.
- How does Chototel plan to solve the problem of urban poverty as prescribed in the Sustainable Development Goals (SDGs) for sustainable cities and communities?
RS: Housing remains a very large component of the urban poverty matrix.
Our business is positioned between social rentals and budget hotels. $2 is a very affordable price point for people at the bottom of the pyramid, and all those who have been priced out of major cities by high real estate prices and soaring private rents.
Additionally, Chototel aims to expand access to clean water and sanitation, as outlined in the sustainable development goals. For example, in an average urban slum dwelling in India, 22% of households have no access to clean drinking water, 14% have no access to a latrine and 74% have no access to a proper sewage system. At Chototel, all these facilities are a given.
Today, 330 million households worldwide suffer from some form of housing poverty (McKinsey Global Institute, 2014). If current trends continue, this figure is likely to rise to 440 million households, equal to one-third of humanity, by 2025. The estimated cost to address this demand – including replacing today’s substandard housing and building additional houses by 2025 – is $9-11 trillion. It is Chototel’s primary belief that the super-budget hotel product, positioned between the social rental product and affordable housing, is an ideal solution to this opportunity. By providing clean, affordable accommodation at this price point, Chototel aims to fill 1% of this world demand by building 5 million affordable rooms within the next decade.
- How will Chototel model operate sustainably over the next 5 years?
RS: Project Economics: In terms of the revenue model, there are two types of revenue from the hotel. The first type of revenue is what we will receive from daily rental yields. The second form of revenue is from services, such as the crèche(child-care) and community kitchen. We will also receive income from the utilities that we generate i.e. water, electricity and gas. The money that we receive from utilities and services is used to run the hotel and the rentals are waterfalled to the investors. We estimate that our investors will receive returns of greater than 10% over a 30 year period.
Sustainability: While social benefits are the main focus of the organization, Chototel’s operations will also ensure environmental benefits. These include a reduced carbon footprint in construction, a reduced carbon footprint in daily operations and efficient waste and water treatment practices. To summarize:
- Our construction techniques eliminate the use of bricks and wood
- Our off-grid, closed-loop utility system fosters the use of renewable sources of energy such as solar power, reducing our dependence on traditional, fossil fuel sources.
- We have redesigned the fitting in the room to reduce energy consumption to a maximum of 120W per room, compared to 3000W for an average hotel room.
The first Chototel project is already underway in Nagothane, an industrial town, 70 kilometers south of Mumbai. This 240-room project spread over 75000 square feet of constructed area will cater to 1000 guests. Each room is 290 square feet in size and this project will target the labour class working in the industrial belt along Mumbai-Goa Expressway.
- Knowing that the target group here are the BOP communities, how does Chototel plan to maintain its standards, safety and emerge as a winner in the stiff competition of real estate?
RS: In addition to the rooms, each Chototel will also include a robust social infrastructure – such as a community kitchen, a crèche, a children’s play area & gardens – that are designed to encourage a supportive community environment. Furthermore, through the use of self-help groups – that are elected residents who will be tasked with running the everyday operations of the hotel – residents will be given the opportunity to work together to achieve common goals that shape the decisions that impact them. Safety, hygiene, and low maintenance are built into the design and procurement and match the regulatory standards in all geographies.
- As you are targeting the laborers and worker class, why do you think they will go for Chototel when they can rent an entire 1HK home in prime areas for $75 per month (as compared to $60 per month per room at Chototel)?
RS: Chototel offers a flexible solution to housing that is not currently available in the market. Many of these individuals are looking for rental housing without the constraints of deposit and committed tenures, and a hassle-free housing solution like Chototel is therefore very attractive. Additionally, most of the housing at the lower end of the market comes without any social infrastructure or reliable utilities or sanitation facilities.
Unlike the usual rentals, Chototel is providing hordes of other facilities to their guests to make their stay comfortable and safe. Not only this, but community level activities like SHGs (self-help groups) will add to the overall development of the BOP who will stay here.
As Chototel opens its doors to their first guests this month-end in the outskirts of Mumbai, we are super excited to see how this idea will be received by the target customers. All the best Rhea!
Rhea Silva is a 24-year-old social entrepreneur with experience in building and managing affordable housing and hotels. Her passion for finding market solutions for some of the most pressing poverty issues led her to start Chototel. Rhea is a valedictorian from St. Xavier’s College in Mumbai and is completing her degree in law this summer.