Start a Modular / Prefab House Business

A modular or prefab house is a house which is manufactured off-site in advance, usually in standard sections that can be easily shipped and assembled. Today we will look at the lower end of the market building using cement fiber board better known by its local trade name “Nutec”. Nutec is an economical alternative to brick and plaster construction, however due to local inefficiencies this cost benefit is not realised. And that is the problem that modular building solves.

Market Opportunity
In South Africa building is expensive, currently houses made from materials such as Nutec is not that much cheaper than building using concrete blocks, clay bricks or even stumbelblocs. The main opportunity is in the lower end of the market for cheaper more affordable houses.

The Challenge
In recent times no business has been able to scale individual erf single dwelling house building like they have in other countries. We have a few developers that specialise in housing estates which are then marketed but not building for single owners on contract. What we have is a large fragmented industry which consists of competent locals who are not cheap and swathes of illegal foreigners working for the pot  who have no concept of scope and deadlines (time) and are simply working to survive. The issue is compounded in areas like the Western Cape – Cape Town in particular where due to demand building prices has soared. In the Eastern Cape or Limpopo you can build a mansion for R1m land included  for R2m you can build a palace or castle, in Cape Town R2m buys you a semi-detached townhouse.

The cost of building has to be brought down, that is not up for debate, now unless you have money to import in bulk or can buy a building material factory to achieve economies of scale and vertical integration – the cost cutting will be achieved on the labour side and not building materials. This has opened an opportunity for low cost modular housing.

If you enter any building site, you will see lots of people standing around twiddling their thumbs (but must be paid for the full day), you will see inefficient building practices like a guy building a wall and checking every five minutes if it is straight; what he is actually doing is dragging the job on and running down the clock to make more money and costing the client more money. Bricklaying like driving a car, typing on a keyboard and learning a music instrument develops muscle memory and experienced person does not need to check every few minutes if a wall they are building is straight or not even without visual aids such as lines or strings. This is the problems that plague the local industry and contractors and foremen can do nothing about it. But easy to assemble houses – made from standard sections are faster and cheaper to assemble if it can be executed with a consistent and efficient “conveyor belt” strategy.

There is something very important I want to talk about and that is design. Just because a house is made from standard sections does not mean it has to be square or rectangular. What we have seen with the low-end Nutec building industry in SA is that they use the same Wendy house design but with  cement fiber board. If you don’t know what a Wendy house is it is basically a brown mans shack in SA. What poor people put up in backyards in places like the Cape Flats. It is made from shit wood probably the detritus of pine logs that is thrown out. And the Nutec guys emulate this design.

As a client if I am building a house and I decide on Nutec. I don’t want it to look like a Wendy house. The correct way to build would have been is to use the Chinese way, a few builders come together and they hire a let’s say German industrial designer and they tell him we want a house design made from nutec that looks nice but does not use much more materials than a basic looking one. Even if it cost R100k for the design, its nothing for a few guys splitting it. I was looking at a house in Brenton on Sea and they went with that same straight “ship lapped” design that look like Wendy house overlap the worst part is they couldn’t even finish the place. Look here:

Copyright Private Property

Now it does not have to be fancy but maybe don’t use a Wendy house as your starting point. Look at the design below. It’s not flashy, it has 8x rooms (not bedrooms all rooms kitchen, toilet counted as rooms), four on the ground, four on the first. If you simplify that and you look at a design in which a structure is divided into four rooms you can cut a lot of costs no need for a hallway, although a hallway is probably not a bad idea especially if the missus is a screamer in bed. I was talking to a nutec house builder the other day and I floated the idea 4x room per floor in a 12x12m structure (simply dividing the structure in 4 equal parts) and he was like “oh the rooms will be too big” and I told him the rooms will be as big as I want it to be. This is the Wendy house mindset of 3x3m rooms that is so prevalent in the local nutec house industry. There is no thinking, no innovation.

Copyright Nutec House Builders

If you look at the house above, and you look at this house in Rhode Island in the US below, it is achievable using the concept of building a simple square structure.


How to build using Nutec
Nutec builders currently provide you with two type of wall designs: flat sheets and planks. Flat sheets are the cheapest with the options being a smooth or textured surface and are usually sold in a neutral colour which many do not even bother to paint. Then there is the planks as seen in the photo above this looks like the nightmarish overlap seen in Wendy houses but is actually shiplap. Nutec planks aka “Vermont Building Plank” is also available in a texture that gives it a timber look.

For the roof the cheap guys often go with IBR (inverted box rib) sheeting it is a square fluted profile sheet metal or the crappy corrugated iron seen on Wendy houses. I personally am a fan of neither. But its an affordable.

For the interior walls, the cheapest option (outside of a plastic lining) is probably plaster board aka Rhino board. Ditto for ceiling. There is a more expensive interior option called tongue and groove boards but that will add higher cost. In fact I have even see cupboards built with  tongue and groove nutec for a uniform look.

Pulling off modular/prefab houses at scale
The question is what will it cost to build “standard sections” at scale. You obviously going to need space for show houses, to manufacture and transport. Then the decision is should you assemble or sell to a network of assemblers that opens you up to the same sub par contracting that plague the laminated flooring industry or any industry where you “recommend” contractors.

The easy way would be working together and pooling resources in a group and sharing a space but that is really hard with the South African mindset.

Modular strategy
If you look at the high-end modular guys discussed below. They often work on a “per module” basis. As in 3x6m, 6×6, 9x6m, 12x6m.  These modules can them be assembled to a desired size. I once needed a storage shed and the wendy house guy did not have the square configuration I wanted, I told him to bring me just the panels of a 9x3m and I made a 6x6m square.

The design below is also achievable using panels or modules made from Vermont planks.

Copyright Dan Reynolds Photography

The higher end of the market
Would you believe if I told you there are most players in the top end of the modular house business than the bottom in SA? The irony of a country where most are poor and unemployed the luxury modular home business is thriving. They do make some pretty nice houses though BlockhouseEcomohome. But I think the low end of the market is ripe for disruption. What I am also seeing is that many areas with cheap plots that traditionally had building guidelines is now opening up to nutec houses. They woke up to the reality that most people cannot afford the building cost and their plots won’t sell as it is too expensive to build and they are relaxing their rules. Now if you can start building nutec fishermans style cottages there might be a lot of money to be made on the coast.