Market Systems to enable sustainability of informal housing in Lima

Labour market insertion, Upskilling and reskilling
03.05.2022
Over the last few decades, the world has experienced an unprecedented urban growth due to population growth and domestic migration, which has led to the emergence of peripheral settlements characterized by informal building constructions that, when located in seismic areas, endanger human lives. This is particularly the case of the Peruvian capital city of Lima.

In view of this situation, Swisscontact has implemented the Construya project, financed by the Hilti Foundation, which mitigates the vulnerability of the homes and promotes safe and sustainable construction through training construction workers and raising awareness within the families in order to have them become agents of change. The goal is to have both the cities and the informal settlements be safe, resilient, and sustainable.

The Construya Perú project elevates the housing construction market’s performance level in Peru, where up to 80% of housing is built through informal self-construction according to reports by the Peruvian Chamber of Construction (CAPECO).

In order to attain sustainability, Construya applies the “Inclusive Markets” approach. This approach aims for systemic changes by promoting the institutionalization of a training offer within the relevant training institutions and enabling access to the professional services market (blueprints and supervision) for housing construction. This supports the revitalization of the supply and demand for services using good construction practices.

Working alongside CAPECO, the Construya Perú project got in touch with MUTUO, a platform that mediates housing construction projects in disadvantaged areas, bringing together architects and families from the bottom of the pyramid who are interested in building their own homes. Based on this experience, the different factors that influence the families' decision-making process in terms of the use of blueprints were analyzed, thereby exploring the feasibility of such services from a market systems approach.

This study analyzed information about the goods and services market for the construction of homes within the base of the pyramid by mapping the current blueprinting service supply in Northern Lima. It was identified that the families value the tangible, built object which helps improve their housing conditions. They prioritize the following components of a value proposition for a blueprinting service:

  • Brand: meaning the evaluation and reputation of the blueprint supplier
  • Quality: that they serve their purpose in terms of the construction process
  • Benefits: whether the blueprints allow them to build what they want (need)
  • Price: the monetary value they need to pay in order to get the blueprints
  • Time: the amount of time they need to wait for the process to begin

Based on this analysis, we can infer that a business model for a blueprinting service needs to be able to articulate the required actions to get the families to reach their ultimate goal: a home (construction); not just the project design services (blueprint) or supervision since they only constitute a mean to the final construction of the home.

The blueprint design service for housing construction is not sustainable on its own. Blueprint designers consider this activity and its contribution margin to be scarce. On the other hand, the execution of works involves a higher value for operators than the elaboration of blueprints by itself.

In this regard, the providers of urban, financial entities, municipalities, and professionals in the construction industry should be coordinated in order for them to become synergic in a way that allows the viability of the potential market’s resources.

This project is financed by the Hilti Foundation. It is part of the Swisscontact Development Programme, which is co-financed by the SDC (Swiss Agency for Development and Cooperation) within the Federal Department of Foreign Affairs (FDFA).

Peru
Upskilling and reskilling
Peru: Promotion of Safe, Sound and Sustainable Construction Practices in Vulnerable Urban Areas (Construya)
Accelerated urbanization, a lack of urban planning and a significant housing deficit have generated an increasing number of informal dwellings. It is estimated that 500,000 homes and more than 700,000 people in Lima live in conditions that place them at high-risk of earthquakes and tsunamis, making Peru one of the countries most likely to...