INTRODUCTION TO BUILDING ECONOMICS AS RELATED TO

ARCHITECTURE

Introduction to Building Economics

Building economics is concerned with production and consumption and
services and the analysis of commercial activities
As it is related to architecture and building activity all types of
buildings for all types of functions by the builders (production) and
consumption i.e., the ones who either buy or hire those buildings for
various functions with the services offered by professionals like
architects, planners, engineers etc.
Ends scarce means
The scarce means like land, building materials, and allied services result
in failing to meet the demand in housing sector.
Basic concept any activity (legally permitted) which shall result in
building activities to serve people for which the people are ready to pay
the price directly or indirectly by buying or hiring the spaces can be
treated as an economic activity.
Goods and services
Economic good is a physical object like natural or manmade (artificial)
goods.
Natural goods
Sources like land, water, air, natural stones, and sand basic raw
materials to be converted to manmade materials to be used for
construction of buildings.
Manmade goods
Product like mosaic tiles, tiles of all stones, ceramic tiles, wall finishes,
doors/windows/woodwork, electrical materials, water supply and

sanitary pipes and fittings etc, harnessing solar power, A/C plants,
heating, cooling etc.
Producers
Producers are individuals, builders, contractors in private sector or
governments state or central.
Primary producers are those who produce raw materials like wood,
stones, basic raw materials for production of building materials.
Secondary producers are those who are engaged in production of
materials like cement, procure sand, metal, steel, aluminium, various
other materials to be used in building construction.
Tertiary producers
Tertiary producers are those who carry out the following functions:

Transportation

Banking

Architects and Engineers etc who offer services, insurance

agencies for buildings, educational institutions, who train
professionals.
Consumers
In good old days, there was barter system with no profit motive. Present
days, the medium of exchange is money which is used in so many forms
for buying and selling for all activities.
We will be discussing Micro Economics and Macro Economics in
detail in our successive articles
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Related posts:
1. Basic Inputs into Building Construction | Engineering
Economics
2. Financing of Projects | Economics related to Architecture and
Engineering
3. Public versus Private Participation relating to Architecture and
Engineering
4. Equity Versus Efficiency | Building Economics

BASIC INPUTS INTO BUILDING CONSTRUCTION |

ENGINEERING ECONOMICS
Building Construction Economics
We will be discussing Inputs into Building Construction in terms of
four important factors:
1. Land
2. Labour
3. Capital
4. Materials
Land
Marshall defines Land Land means the materials, and the forces which
nature gives us freely for the human beings (other creatures as well), in
land, in water, in air, light and Heat.

Land is natures gift

Land has no supply price (supply remains same) whether price of

land is high or low

Land is permanent (lack of mobility)

Land lacks mobility in geographic sense

Provides infinite variation in fertility, utility, situation etc

Labour
Any work whether manual or material which is undertaken for a
monetary consideration, is called Labour in economics.
Marshall defines Any exertion of mind or body undergone partly or
wholly with a view to some good (consideration) other than pleasure,
derived directly from work.

Labour is inseparable from labourer.

Labourer has to sell his labour in person.

Labour has no reserve price.

Labour has weak bargaining power.

Labour force cannot be increased or decreased.

Capital

Refers to that part of mans wealth which is used in producing further

wealth or which yields an income. Land is considered as a capital as:
1.
2.

It is free gift of nature.

Capital is perishable whereas land has no mobility.

The capital can be increased but the amount of land is fixed and the
value may vary depending on location. Capital formation is the very
core of the Economic development. Without capital, Building industry
cannot survive and flourish for the benefit of the society.
Materials
Materials are available in two forms:
1. Natural Materials
2. Manmade Materials
Natural Materials
Natural materials such as stones, mud, minerals, water (wood), ores for
various materials like Gold, silver, copper, iron, aluminium, sand etc.
Manmade Materials
These materials include bricks, stone blocks, tiles, granites, marble, steel,
aluminium, copper products, PVC, cement, wood, plywood, laminates,
paints, most of the building materials.
Building industry put to use both natural and manmade materials, to
construct structures to cater to various needs of human beings on the
Gods Gift LAND.
Technological research in producing innovative new Building Materials
that can withstand suitably THE GLOBAL WARMING, which is causing
ecological imbalance at an alarming rate and such innovations are the
need of the hour. This is true especially in the case of our country
INDIA.

FINANCING OF PROJECTS | ECONOMICS RELATED TO

ARCHITECTURE AND ENGINEERING

Financing of Projects | Economics related to Building Industry

Financing of Projects is the most important factor determining the
success of the project. Various factors influence the success of a project.
In this article, we are going to study the major factors that are
responsible for the success of the Building project
Here are the four factors:
1. Sources
2. Total Cost Estimation of the Project
3. Utility in Financing
4. Agencies and Institutions directly and indirectly influencing the
economic aspects of a project
Sources
Loans are available for both purchasers and Builders from:
All Nationalized Banks,
Co-operative Banks,
Private Banks,
LIC HFL,
Finance Companies,
Insurance Companies like General Insurance Co (GIC), United India
Insurance Co Ltd, National Insurance Co Ltd, Oriental Insurance Co Ltd,
New India Assurance Co Ltd (for the employees), Foreign Direct
Investment FDI, 20 Nationalised Banks along with Regional Rural Banks
come under Public sector.

Commercial Banks, Cooperative Banks operate under provisions of

Cooperative societies Law of states for credit and non-credit purpose.
National Bank of Agriculture and Rural Development (NABARD) help
Farming sector.
Total Cost Estimation of the Project
Price to be paid for a things like;

The cost of living

General level of prices

The cost of price of an article

Cost of production

Cost of house or property

A house should be built based on an estimated cost. If the building cost
increases, it will be a loss and if it can be reduced, it will be a saving for
the individual as well as for the company as a whole.
Utility in Financing
Proper utility of the available financial resources in a planned manner
will result in the success of the projects. Any improper planning, lack of
technical expertise, under utility of technology and expertise will result
in the losses of the project as well as loss to the resources of the Nation
as a whole.
Agencies and Institutions directly and indirectly influencing the
economic aspects of a project
Interest rates by banks, availability of materials (products, producers of
materials), Governmental agencies, both central and state policies in
making finances available for loans, personal savings, demand and
supply, Population (Growing in India and decrease in some western
countries).
Economic stability of the country, Global Economy, Location of the
projects, Inflation or Deflation. All the agencies those advance Housing
loans like Specialised Financing agencies like HUDCO, HDFC, National
Housing Bank (NHB). More than 90% of the dwelling units are financed

by Housing and Urban Development Corporation (HUDCO) for

economically weaker sections and Low Income Group.
Introduction to Building Economics as related to Architecture

Introduction to Building Economics

Building economics is concerned with production and consumption and
services and the analysis of commercial activities
As it is related to architecture and building activity all types of
buildings for all types of functions by the builders (production) and
consumption i.e., the ones who either buy or hire those buildings for
various functions with the services offered by professionals like
architects, planners, engineers etc.
Ends scarce means
The scarce means like land, building materials, and allied services result
in failing to meet the deman in housing sector.
Basic concept any activity (legally permitted) which shall result in
building activities to serve people for which the people are ready to pay
the price directly or indirectly by buying or hiring the spaces can be
treated as an economic activity.
Goods and services
Economic good is a physical object like natural or manmade (artificial)
goods.
Natural goods
Sources like land, water, air, natural stones, sand basic raw materials to
be converted to manmade materials to be used for construction of
buildings.
Manmade goods

Product like mosaic tiles, tiles of all stones, ceramic tiles, wall finishes,
doors/windows/woodwork, electrical materials, water supply and
sanitary pipes and fittings etc, harnessing solar power, A/C plants,
heating, cooling etc.
Producers
Producers are individuals, builders, contractors in private sector or
governments state or central.
Primary producers are those who produce raw materials like wood,
stones, basic raw materials for production of building materials.
Secondary producers are those who are engaged in production of
materials like cement, procure sand, metal, steel, aluminium, various
other materials to be used in building construction.
Tertiary producers
Tertiary producers are those who carry out the following functions:

Transportation

Banking

Architects and Engineers etc who offer services, insurance

agencies for buildings, educational institutions, who train
professionals.
Consumers
In good old days, there was barter system with no profit motive. Present
days, the medium of exchange is money which is used in so many forms
for buying and selling for all activities.
We will be discussing Micro Economics and Macro Economics in
detail in our successive articles

Equity Versus Efficiency | Building Economics

Efficiency in Economics
Capability and able to perform duties well. The efficiency in production
of building materials is high as there is competition and those who work
in production are offered annual bonus depending upon the profits
made by companies.
The efficiency in construction industry is generally high if the projects
are handled by Architects, Engineers, and experienced builders.
Unfortunately many constructions re handled by builders who are not
experienced.
This is due to the ignorance of the public and loss of investments by the
public. Most of such constructions are mediocre.
Equity in Economics
The central Government helps the public in offering fair rates of interest
of the public invests in Central Schemes like Indira Vikaas Patrika (IVP),
Postal Savings schemes which offer Monthly income schemes on
investment in Postal saving schemes and they offer interest on fixed
deposit also. Share market is most risky as it is volatile.