Nano Homes - The “Bottom of the Pyramid”

Tata group has once again caught the attention of the world media with its announcement of the launch of a low-cost housing programme. Many global newspapers, from Business Week covered the news prominently. According to the Tata Group, the houses will cost less than Rs.4 Lakh. Even though many other property developers have also built affordable houses, Tata group got huge media coverage because of the spillover effect of the “Tata Nano Car”.

According to the “Telegraph” newspaper, this is what Mr. Brotin Banerjee, CEO of Tata Housing, said “This is a huge opportunity to serve those at the bottom of the pyramid. Our inspiration is the millions of Indians who cannot afford proper housing and live in shanties.” The newspaper also says that “millions of slum-dwellers are expected to jump at the chance to own a home in a proper building”.

Tata Group aims to achieve two things from this venture – first, fulfill its corporate social responsibility and second, make profit. This is precisely what Mr. C.K. Prahlad, the renowned management guru, has been advocating.

In his 2006 book “The fortune at the bottom of the pyramid”, Mr. Prahlad describes the people at “the bottom of the pyramid” as those 4 billion people living on less than $2 per day. He argues that “If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up” and “When the p oor are converted into consumers, they get more than access to products and services. They acquire the dignity of attention and choices from the private sector that were previously reserved for the middle class and rich.?”

Mr. Prahlad cites the successes of Nirma and ITC as two best examples of profitably serving the “bottom of the pyramid” customers. While Nirma succeeded by targeting lower income group with its affordable detergents (Hindustan Lever initially ignored it but later realized the huge potential in this market), the latter combined technology and the village “mandi” to generate profit for themselves and for the farmers by eliminating the middlemen.

Now it is the turn of Tata Group to effectively use the idea of the “bottom of the pyramid”. First they came up with Tata Nano. Now they are planning to repeat the success of the idea with its Nano homes. With this, Tata Group is once again setting a great example as a company that cares not only for profits but also for people. Will other companies follow suit?