Can this 'super budget' hotel shake up the affordable housing sector?

HONG KONG — While much of the affordable housing sector remains focused on home ownership, Rhea Silva is concentrated elsewhere: On a new canary yellow, 240-room budget hotel in western India.

Silva is the 25-year-old founder and managing director of Chototel — “chotu” means small in Hindi — which aims to offer a private sector alternative to social housing for those at the bottom of the pyramid through its pilot project outside Mumbai.

The young entrepreneur was just presented with Habitat for Humanity’s Innovate Shelter Award, which she bashfully stowed away before speaking with Devex in Hong Kong on the sidelines of the Asia Pacific Housing Forum. Networking and attention are her least favorite parts of her role as founder, she shared conspiratorially, but she’s more than happy to sit down and talk innovation in affordable housing.

Chototel, which is set to open in December, is the answer to two major issues in the sector, Silva said: A gap in the housing market and a rapidly changing market demand.

Home ownership remains a source of security for many, but “as we can see it’s becoming more and more expensive to own a house, and there’s no model to fill the gap between being able to own a house and being priced out of the rental market,” said Silva, who grew up working in affordable housing with her family in Mumbai before moving to London, where the operations of Chototel are now headquartered.

What’s more, the market is changing, Silva added, and people are “no longer possessive about actually owning a house. We’re moving toward a generation of rent, toward a generation of being more mobile, and more tech savvy.”

Located along National Highway 17 between Mumbai and Goa, Silva’s hotel will provide an affordable accommodation option to the approximate 50,000 informal workers in the vicinity, many of whom are currently living in makeshift shelters without access to water and sanitation, she said. At Chototel, rooms will go for as low as $2 per night and surge up to $5 based on market demand, and can be shared by up to four people per room. Customers, who can stay at the hotel for as long as they like, will be charged for electricity, water and gas on a consumption basis, using tech solutions to monitor how much each room is using.

Her first hotel in Nagothane, an industrial hub for steel production and construction, is not painted bright yellow by accident, but rather to convey dignity and joy: “Even the fact that we call ourselves a hotel rather than rental housing — there’s a sense of arrival, a sense of joy,” Silva said.

And it won’t be her last. Silva is designing the project with scale in mind. Real impact in housing won’t come from addressing one community in one area, she explained, but from designing a project independent from subsidies, donations or government intervention, which can then be launched in countries around the world.

Worldwide, some 330 million urban households can’t access affordable and secure accommodation. These gaps in affordable housing are forecasted to grow by more than 30 percent to 1.6 billion people by 2025, according to the consulting firm McKinsey & Company.

Attendees of the Asia Pacific Housing Forum in Hong Kong last week heard this in various forms throughout the gathering, where keynote speaker Chief Executive of Hong Kong Carrie Lam made reference to the densely populated city’s own affordable housing shortage. About 30 percent of Hong Kong’s population lives in public rental housing, and those who can’t afford private property often wait up to five years for a public rental flat.

“Hong Kong is not short of land or the options to provide more land,” Lam said. “What is lacking is a broad consensus on where the land should come from.”

In India, Silva pointed out that the government could also be taking action to help the poorest — for example, opening up land parcels in transport areas to make it more accessible for people living in the outskirts of town to travel into the city for work.

But she can’t wait for government consensus and directives, she said. Instead, she’s leaning heavily on tech to keep the housing she’s offering affordable.

From construction to operations, the use of technology features prominently in the Chototel model. The hotel, which is comprised of four buildings with 60 rooms each, is built with light steel frame technology. Front desk functions and other services such as utilities are automated using the Internet of Things to collect and exchange data. Insulated walls reduce the need for heating or cooling the rooms, while ceiling fans, TVs and other appliances were selected specifically to ensure each room consumes as little electricity as possible.

Silva hasn’t invented any of the technology used in the design: “Solar power exists, water recycling exists, gas and renewables exist, Internet of Things exists, I think we just spent a lot of time integrating it into one prototype.”

The result is a hotel that has reduced operational and maintenance costs to almost negligible, she said.

Every Chototel room costs about $10,000 to build, and the hotel will then rely on two large sources of income: Money earned from utilities will go toward operations of the hotel, costs  already low because of the tech-driven design. And rental income, estimated to be about 12 percent per room pre-tax, will be used as capital return to real estate investors.

Right now, Chototel is funded by friends and family, but Silva expects that capital is available for the asset-heavy business, which makes it less risky and more attractive to potential investors.

While her Chototel design will not yet tackle urban centers, she hopes to prove the concept in Nagothane and later move to cities in order to cater to students and young professionals as well.

Along the way, she wants to throw open the doors to invite more social entrepreneurship into the housing sector.

“I think the social sector suffers … social entrepreneurs think that social business should be kept local, they should limit themselves from scaling, or that profit is a bad word. So I think changing that mindset is important, and proving you are able to do good and also make a profit is very important. That’s what I want to do with Chototel.”

Silva has already identified a second project site outside the city of Pune, India, in another industrial area. The Pune project will look much the same at 240 rooms, but the entrepreneur has set her sights on a much larger scale project to follow — at 1,000 rooms, and using the same tech, with a site yet to be identified.

“By the year end, we’ll have a running pilot and then we’ll go out and scale the business,” Silva said of the project she’s dubbed “The People's Hotel.”

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