Difference between custom built house construction and commercial building projects

Designing as per your requirements and constructing a house in your land is not exactly similar to buying an apartment or villa from a builder. In the case of buying a house from a builder you have no say or control on the following
1. Design of the house
2. Structural design for the building
3. Quality control on construction
4. Price of the finished product
5. Specifications of all input materials, items used for construction
6. Payment schedules
For any such builder who offers an apartment or villa, all specifications including detailed bill of materials are available with him. Just like any other manufacturer he prices his product with margins as high as 50 % to even up to 200% or more against his input costs which are under his control to a great extent as he is not liable to be cross checked or inspected for any aspects of construction till finish of project with specifications already frozen by the builder and accepted by buyer. In most of the cases builder gets more than adequate advance of funds from the buyer. A buyer who books the apartment or villa before commencement of construction gets a price less than the price which a buyer on completion of project is offering. That does not mean that the buyer before construction gets price with very low margin to the builder. Builder in turn gets much higher margin from buyer approaching him on completion or nearing completion stage of the project.
In situation where the demand for the house is in excess of construction projects available, naturally the margin of the builder goes up. This enhancement of margin is treated as price increase by the buyers when actually there need not necessarily be a cost increase in inputs of construction. Another point to be noted here is that almost all builders form a cartel just like any other organized business sector so that price levels are kept at a higher level to maximize profit for that class of builders or business group
In India there is not exactly an economic recession. May be there is an economic growth slow down with GDP growth coming down from 9% to as low as 6%.This economic slowdown has not produced any price reduction in the case of cost of inputs to any industry. Huge margins of business segments operating with cartelized pricing has come down as a result of lesser demand for their products and services. That does not mean that basic prices for construction inputs have come down. In fact basic raw material and labour costs are always gradually increasing with time.
When we take up construction of your house, we are not acting like a usual builder of apartments or villas.
We design your house specifically for your plot considering its peculiarities and specific features and your requirements to the extent possible considering limitations of plot, architectural, structural and Vasthu constraints.
Estimate we prepare is based on the available data considering present basic input costs. Unlike usual builders we are not operating with frozen design and specifications. Design parameters and specifications can be changed by mutual discussions and as per professional suggestions from our side to improve quality, utilty and better appearance and finish of the house at any stage. Initial estimate prepared may not have considered many aspects like details of exact specifications works after completion of structural work like Electrical, plumbing, flooring, painting, interior wood work, landscape work, compound wall work etc.Initial estimate simply gives you an indication of cost that can be expected based on data available prior to construction.
Basic input costs for construction can go up or come down depending upon market conditions (These market conditions are not cartel pricing changes by a small business community) During one year or more required for completion of the house basic input costs can vary and therefore even rates indicated by us in initial estimate for various items of construction can also change.
In clearer terms you are actually acting as a manufacturer of the house with complete freedom to suitably modify specifications for construction of the house at every stage of construction. Unlike a builder in the building business class, we ensure that every design details are fully correct and the best possible without limiting or compromising to bring down input costs to maximize profit.Infact unit costs for each item in the construction indicated in the estimate has not considered not more than 10% margin for our work. Unlike a commercial builder operating with huge margins, we may not be able to absorb input cost increases and increase or decrease in input costs will have to be passed on to you. This is precisely why we give stage estimates prior to each stage of construction which are binding on us for the billing to take place immediately after that particular stage of construction.
A commercial builder can give a square feet cost for construction as he is operating with frozen specifications and quality not counter checked even by his customer and margin of operation known only to him protected by his competitors due to cartel pricing. In reality if you look at cost of building construction on the basis of input costs, there is no meaning for the term, square feet cost. For details on this you can refer to my blog entry on square feet cost
Initial estimate given naturally cannot correctly quantify or assess data for finishing work for a custom built house .Data for these will be available at that stage based on our mutual discussions and finalisation considering also your funds availability at that stage
Contractors do not give an almost realistic costing indication to the prospective client in the beginning as the client is likely to seek alternative arrangements thinking that the cost indication is high. Alternate contractor will also try to mislead the potential customer with less cost indication in the beginning as the client will have no other option other than sticking to the contractor after commencement of work and realizing the fact that no builder or contractor is insulated from varying basic cost inputs except when quality of construction can be compromised.