Thasmai has been covered in a recent article on Home Automation and new trends in housing published by Prajavani, the leading daily newspaper in Karnataka.
To understand why retrofit solutions have not yet been successful in India yet, let’s take a detour into the mind of a typical Indian home builder. The psychology of an Indian consumer is to treat his/her own house as a lifetime dream, a culmination of many years of savings, hard work and desires. Hence, the consumer desires to make this dream as big and grand as possible (relative to his/her spending power, of course!).
Before or during construction- Upmarket individuals (like HNIs/NRIs or wealthy businessmen) want the best features and fancy gadgets/tools in their new dream house. During the planning and construction of the new house, their minds are only occupied with this one goal; to fit the latest available trends in their house as well, and be the envy of their social circles. This is evidenced best during the Gruhapravesham (House warming ceremony) which marks the auspicious ‘opening’ of the home, where relatives, acquaintances and friends are invited to witness the new house in all its grandeur. While the owners have just moved into the house and the novelty lasts, Home owners take pride in showing off various aspects of their home to visitors/friends for the first few days or weeks.
A year or two later- As the months/years pass, the consumer has been sated with his/her ideal of the dream home, long having gotten used to all the features available and nothing in these technologies makes him excited anymore. The customer now slowly feels the pinch of maintenance of these added gizmos and the costs needed to keep all of them running in prime condition, he is no longer interested in investing on any new add-on for the home, his hope is that all existing components continue running for as long as possible!
At this stage of the Home owner’s cycle, he will not contemplate further investment on luxury items unless it is a necessity or a separate unit to add like a swimming pool or Home theater.
After 4-6 years of living in the house, the owner now dreams of his next dream house with all his newly added aspirations and plans for the next home instead of directing any new investment into this home.
Let’s try to discern now why retrofit doesn’t work in the above scenario-
•Timelines or Milestones are required to push customer with typical Indian mentality. If there is no hurry, then Chalta hai (we can do it some other time) attitude prevails. But with the Housewarming ceremony and the threat of embarrassment of a partially completed house to display to people, it becomes a powerful motivator for consumers to take quick decisions to finalize Automation and other add-on immediately and push for installation.
•Home automation solutions, in their current avatar in India can be considered expensive and cosmetic add-on to a home. No one ventures into adding value to existing buildings once their ideal of a dream home has been satiated. Hence, retro-fit HA has not been able to penetrate the market or fulfill any potential yet.
Home automation is still viewed as a luxury and not a necessity by Home owners. Due to the high cost of products currently, Home Automation is considered affordable by Individuals with Net Worth more than 5-6 crore. Currently, there are 182,000 millionaire households in India. This number is set to grow to 294,000 in next 4-5 years
People with Net Worth of less than 4-5 cr can’t relate to Home Automation as an add-on, since other priorities for the home would then fight over the same budget (for e.g. Kitchen modules/bathroom fittings/Jacuzzi/ swimming pool/ consumer durables such as high end TVs).
Because Home automation is still viewed as a luxury offering, the Finish, Look and feel of the product, as well as the brand image associated with the product matter MORE than technical features of the solution, or the value in pricing.
Trends in the Indian Home Automation Market
There are several Indian start-ups that are making solutions that are retrofit and have real values at affordable price. Being technology startups, they lend a lot of importance to features, however the look and feel of their products are unimpressive till now. We opine that solutions with cheap look and feel, unknown/new brand with affordable price point is considered as low quality product in the Indian market. Hence, Good solutions and reasonable price points are still not able to make impact in Indian market.
In the previous blog post, we covered the present state of the Indian Home Automation market, here we speculate on what may happen in the coming years
Growth in Automation Market in India (2018-22)
The next phase for the Home automation market will occur based on a few key improvements in the technology available in Automation, such as improvement in Wireless Automation solutions as well as lowering of price points as the market begins to accept Home automation usage in larger volumes. Some trends that we foresee for this phase of the industry are
• Big companies like Philips, Siemens & Schneider will eventually bring out fairly mass market automation products with appealing user interface but at a lower price point than today, and more people will be able to afford the products
• Solution offerings will slowly move to a more user friendly design, where aside from a few key components, users will be able to buy and use the Automation products themselves without the aid of any technical expert
• Some foreign players will have niche in high end automation and focus on the premium market (>20 Lakh ticket size).
Commodification of Automation market (2021 onward)
As with any industry, as Automation for residences become common place, the market will eventually be crowded with several players, multiple product offerings and competitive pricing. The market for just Home automation is estimated to be 3.2$ Billion by 2020. If IoT were to become common place, then we’re looking at a multi-billion dollar opportunity in the Indian market.
- We foresee that all major players will have a presence leading to competition in prices and lower margins
- The products themselves will reach a ‘plug and play’ type of usability, where users can simply purchase pieces from the store and use it themselves without any support from professionals
- Many (most) houses will incorporate some aspect of Automation in the home, from Lighting, security or HVAC elements. Home Automation will be as commonplace as having a Fridge or Television in the house.
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Current Market (2016-2017)
The estimated market size for Home automation in India is currently 300$ million, some characteristic features of the offerings available in the market today are
•Current suite of Offerings do not cater to the mass market: Automation products are not manufactured widely, nor are they branded or positioned to fit the needs of the average middle class Indian consumer. It is still considered a Niche High end add-on for the home which is currently only targeting HNIs or buyers of premium villas/apartments
•Designing and installing Automation in a home is still a technical process and cannot be done by the consumer themselves. Most typical electricians in India would lack the know how to use controllers and the programming involved to set up the protocols.
•Products having good specs and finish are expensive: Some Global companies like Crestron have good solutions with excellent finish and technical specifications; however they are all priced beyond the reach of most Indian consumers.
•Lower priced solutions have shabby look and build: Some Indian startups and companies have some offerings in the tens of thousands Rupees price points, which despite their compelling value offering, do not have a classy look and finish due to which they have not been embraced by the market.
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Multiple factors have contributed towards the growth of home automation, entertainment and security systems, namely the growth of smart phones, penetration of mobile apps, coupled with the rise in income levels of the middle class. The popularity of home automation and controls has been on the rise due to greater simplicity and affordability through connectivity using Wi-Fi-enabled devices such as tablets and smartphones.
India is the fastest growing market for home automation. The industry has been witnessing an annual growth rate of 30-40 per cent. Given the burgeoning demand for electricity in India, conserving energy also becomes an imperative for the future. And herein lays the opportunity for automation systems, which control the basic functions of a home automatically or through remote access of a computer and improve the standard of living, while ensuring energy efficiency.
The home automation market is worth about $300 million as of today and the growth potential of the sector has been pegged at Rs 20,000 crore ($3.2 billion) by 2020. In the current market, the surge of smart phone usage will contribute significantly to Home automation usage in the upcoming years.
One of the main buzz words everybody has been mentioning in the last few years is the Internet of Things (IoT). The Internet of Things is the network of physical objects or “things” embedded with electronics, software, sensors, and connectivity to enable objects to exchange data with the manufacturer, operator and/or other connected devices based on the infrastructure of International Telecommunication Union’s Global Standards Initiative. IoT will allow objects to be sensed and controlled remotely across existing network infrastructure, creating opportunities for more direct integration between the physical world and computer-based systems, and resulting in improved efficiency, accuracy and economic benefit.
The Internet of Things revolves around increased machine-to-machine communication; it’s built on cloud computing and networks of data-gathering sensors; it’s mobile, virtual, and instantaneous connection; and they say it’s going to make everything in our lives from streetlights to seaports “smart.” IoT devices can be used to monitor and control the mechanical, electrical and electronic systems used in various types of buildings (e.g., public and private, industrial, institutions, or residential).
The current Automation systems are developed by MNCs such as ABB or Schneider which are highly upmarket products (in their build, finish and positioning), you could argue that India is not the primary market they’re aiming to serve, so any such product you procure will most likely have been imported.
The organizations that make these have massive overheads/R&D departments that need to function for these materials to be developed and refined over time. After all, you don’t question why bottled water costs 1000X of what it should cost, or why any FMCG product costs 25X of what it should.
Thirdly, home automation systems are still a nascent field in India and there are several Indian firms which are aspiring to make much more affordable products keeping in mind the spending habits of the Indian buyer segment. Give it a few years and you’ll see Home Automation products across all price categories and segments.
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Some of the drawbacks (at present) of a Home Automation system are;
1. There aren’t any flawless retrofit solutions available yet: If you’re building a new home, then wired solutions work great but for customers with existing homes there hasn’t yet come a solution to have them on-board the ‘Smart Home’ revolution
2. Home Automation is still an expensive product, by Indian consumer standards, and there’s a lot of scope of the prices to be whittled down by an order of magnitude at least in the next few years. This will happen as more Indian companies manufacture the key components of Automation systems (controllers, Gateways etc) and economies of scale takes over.
3. For now, Smart home solutions work well in silos (Lighting, HVAC and Audio/Video automation works very well currently) but can be made a lot more holistic to include all the gadgets in your home. This should be possible in the next 3–5 years as more appliances become ‘smart’ and new strides are made in the IoT space