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# How May Modular Construction Transform the Built Environment Ecosystem?

Vighneshkumar Rana(✉) ID and Vishal Singh(✉) ID

Indian Institute of Science Bengaluru, Bengaluru 560012, Karnataka, India
{vighneshkuma,singhv}@iisc.ac.in

**Abstract.** This paper presents a novel viewpoint on modular construction, seeking to create new opportunities to transform the built environment ecosystem by taking a product lifecycle and systems perspective. Based on a review of the challenges with modular construction and the recent social trends, it is proposed that the modular construction approach and modular spaces can offer a means to address one of the fundamental limitations of the existing built environment solutions– the coupling of products (built spaces) and their location. The propositions are based on a literature review and abductive reasoning. It is argued that in the current approach to modular construction, the modularity is typically lost after construction, that is, once the building is constructed. In contrast, novel modular construction approaches could seek lifecycle modularity goals as a part of the systemic built environment solution with the vision to achieve the decoupling of products (built spaces) from the location. It is argued that the decoupling of product and location will create new business and societal opportunities for modular construction, in keeping with trends such as sharing economy, resource effectiveness, adaptability, and flexibility of offerings for the end customers. This paper is based on theoretical arguments. Further research is ongoing to develop a proof of concept and test the technical feasibility, market viability, and social desirability of the proposed approach.

**Keywords:** Built environment · Technology · Modular construction · Global trends · Real estate innovation

## 1 Introduction

Offsite modular construction is when building components are constructed offsite in a factory with a controlled environment, transported to the construction site, and assembled. Modular construction has been shown to improve housing quality, reduce labor requirements, reduce construction time and uncertainty, and reduce environmental effects around the construction site. Consequently, in the last two decades, modular construction has attracted the attention of construction industry and the governments and regulatory agencies across multiple countries, especially developed countries [1, 2].

Despite the acknowledged benefits, support of the government agencies, and a range of enabling initiatives and efforts by different stakeholders to promote modular construction, the desired level of impact and adoption of modular construction in practice
is lower than expected [1]. The private building sector still relies heavily on traditional construction methods [2]. The global modular construction market is still struggling to gain traction. Only 2–3% of the worldwide construction sector uses modular construction. The construction industry is by and large following the same methods and processes invented decades ago, with limited improvements in the quality of the buildings around us.

Some of the reported reasons for the low adoption of modular construction include lack of design guidelines, lack of training and investors, transportation difficulties, reliability of connection systems, and intensive capital requirements [2]. Despite exploration of approaches such as lean construction to address the identified issues, the gaps remain, especially in connecting technical advancements to industry practices and market reality [3]. Others continue to explore these challenges from the perspectives of construction technology and management. For instance, Liu et al. [4] propose a digital twin-based safety risk analysis of prefabricated buildings.

Hence, it is becoming apparent that there is something amiss in the current assessment of the reasons for the slower adoption of modular construction. For instance, Pasquale et al. [1, 5] suggest the need to change the way modularisation in construction is conceived and implemented. Similarly, this paper argues that a holistic, value-based, and market ecosystem-level understanding of the dependencies is required to identify other challenges and opportunities for the wider adoption of modular construction practices. Consequently, this research adopts an ecosystem perspective at the societal and built environment business ecosystem level and does not limit the analysis to construction technology and methodology issues. In particular, the research recognizes that the real estate factors, especially the dominance of the location of the property in the valuation of a building or housing, remain a critical factor. That is, the research builds on the argument that the eventual valuation of a typical housing is determined by its location to such an extent that it often does not matter whether a better-quality housing product (leaving the location factors aside) can be provided through one production method or the other, including modular construction.

Therefore, it is argued that the real estate market factors and the contemporary housing trends must be part of the modular construction strategy. We build on the premise that the technological effort toward modular construction is likely to see greater success if it can create new growth opportunities in the real estate market, not just by improving the production-centric technological methods. Hence, this paper revisits modular construction from the systemic and real estate business ecosystem perspective, focusing on reducing the coupling between the product (building) and its location. It is argued that the decoupling of the product and location will lead to an independent assessment of the product and the location, which otherwise tends to get entangled as one single offering where the value of the location tends to outweigh the value of the product.

## 2 Research Approach

This research is based on a literature review and theoretical arguments, building on abductive reasoning. Abductive reasoning seeks the best plausible explanations of observable
patterns for scenarios where inductive reasoning or deductive conclusions are not ade-
quate. Figure 1 shows the research steps and the flow of arguments leading to the research
hypotheses and the planned next steps. Two main research hypotheses are proposed.

*Hypothesis 1:* The inclusion of real estate market factors in the conception of modular-construction-based solutions will generate greater value and market acceptance for modular construction.

*Hypothesis 2:* The decoupling of land and the built asset (product) will lead to an independent valuation of the built asset (product) and the location, resulting in increasing recognition of the quality of the built asset (product).

This paper provides preliminary theoretical evidence to justify the relevance of the hypotheses. The validation of the proposed hypotheses is outside the scope of this paper. The hypotheses have to be tested for technical feasibility, market viability, and social desirability as part of the ongoing research.

<figure><img src="image_2.png" /><figcaption>Fig. 1. Research steps and approach</figcaption></figure>

**3 Background and Review**

This section briefly reviews and reflects on the literature and trends associated with
modular construction and the built environment ecosystem.

**3.1 Need to Adopt a Product and Product Lifecycle Point of View**

There is increasing call for industrialized construction and the need to view build-
ings as products [6]. The current housing solutions do not demonstrate generational
transformations that are observable in modern manufactured products such as cars and
phones. Current housing solutions typically remain outdated, with incremental changes
in construction technology and performance [5].

Considering housing as a product may offer opportunities to improve product qual-
ity. Nonetheless, product-centricity in housing and modular construction is currently
production focused. The modular construction research is currently focused on manufacturing and assembly, improving the construction process, speeding the construction time, enhancing offsite manufacturing, and improving quality [1, 2]. The target value of such an approach is geared towards the construction process. It does not directly target the real-estate valuation, which is the most critical factor in choosing housing solutions. Others such as Pasquale et al. [5] have also argued the need to revisit modular construction as means to address changing societal trends. For instance, there is a demand for housing solutions that suit modern urban lifestyle. Thus, there is an apparent gap in the product-oriented approach to housing solutions. Pasquale et al. [5] suggest that modularity can help fill this gap.

In general, modularity is also desirable from the perspective of product lifecycle management. Ishi [7] assessed the impact of modularity on product lifecycle engineering and concluded that modular products offer high serviceability and recyclability, leading to high life cycle efficiency. Modularity provides means to respond to technological changes and flexibility requirements in products [7].

Different levels of modularity are possible in building housing [8], offering different benefits according to the stage in which modularity is introduced, as shown in Table 1. Panel-based approaches introduce early and more granular modules. However, the benefits are relatively low compared to Prefabricated Prefinished Volumetric Modules (PPVC), where modularity is more aggregated and late stage, but with higher benefits of cost, time, and quality. Nonetheless, in the current modular construction approaches, the PPVC modules typically lose their modularity once the building is constructed because the modules cannot be independently replaced unless the whole building is disassembled.

<table><caption>**Table 1.** Levels of modularity in housing solutions and delayed differentiation</caption><thead><tr><td>Modular construction approach</td><td>Specification</td><td>Life cycle stage where modularity introduces</td><td>Benefits of postponement</td></tr></thead><tbody><tr><td>Panelised modular system</td><td>Building wall panels manufactured in a factory and assembled on site</td><td>Early</td><td>Low</td></tr><tr><td>3D module manufacturing</td><td>3D structure (part modules such as modular bathrooms)</td><td>Middle</td><td>Moderate</td></tr><tr><td>PPVC</td><td>Prefabricated prefinished volumetric construction (fully completed apartment modules)</td><td>Last stage</td><td>High</td></tr></tbody></table>

The proposed solution approach seeks to leverage the benefits of PPVC modules, but alter the assembly process to seek lifecycle modularity. The objective is to not only introduce modularity in the last stage but to retain it across the lifecycle of the building.
This creates an opportunity to further the benefits of postponement because the PPVC modules could be replaced anytime during the lifecycle of the building. This argument forms the basis for the first hypothesis.

## 3.2 Need to Consider Real Estate Market Factors

Modular construction is argued to improve quality, and reduce labour requirements, construction time, and environmental effects [1, 2]. All these arguments are production-centric. Whereas, the real estate literature shows that the housing purchase behaviour is largely influenced by real estate factors, predominantly the location [9, 10]. Similarly, a review of popular housing portals shows that location is the most emphasized factor in housing deals. Hence, it is reasonable to argue that the modular construction approach needs to strategize around real estate factors for wider adoption.

Explaining the housing purchase behaviour, Wong et al.[9] state that real estate can be considered a hybrid product that combines the land and the building structure. The land value is largely transparent, whereas the building value is somewhat opaque to the buyer who has less information about the building than the seller. This asymmetry results in valuation largely determined by the location. Wong et al. [9] draw upon George Akerlof's lemon theory [11] to support their findings. They conclude that land drives the liquidity of the real estate market even if the buyers do not have uncertainty about the building.

Hence, it is argued that the coupling of the built asset and the land skews the valuation towards the land, reducing the importance of the product quality. Decoupling land and the built asset can be one of the ways to reduce this asymmetry and put independent emphasis on the product quality. This argument forms the basis for the second hypothesis. Hence, it is reasonable to conclude that the coupling of the built asset and the land skews the valuation towards the land, often leading to reduced importance of the product quality. Decoupling land and the built asset can be one of the ways to reduce this asymmetry and put independent emphasis on product quality. This argument forms the basis for the second hypothesis.

## 3.3 Need for Decoupling of Product and Location

Seeking solutions to decouple building products from the location is not a new endeavour. Several solutions that allow decoupling of building products from the location either exist or have been proposed earlier, albeit for reasons different from what is proposed in this article. For example, mobile homes, caravans, and portable units have existed for a long time. Nonetheless, the literature suggests that such mobile homes are not attractive from the real estate perspective as they are not considered building assets, which makes it difficult to procure loans or financing for such units [12]. The primary driver for such solutions, therefore, is affordability and lifestyle choices, and not really the drive to improve the product quality or change the real estate dynamics. Similarly, portable mobile shelters and units are often used as temporary shelters in emergency scenarios. Once again the objective is temporary housing and not the drive to improve product quality or change the real estate dynamics. Decoupled modular solutions have also been part of the visions of futuristic cities, typically driven by projected lifestyle
and benefits of industrialization [13]. A few notable examples include Yono Friedman's concept of independent dwellings, and the Archigram and Metabolist concepts from the 1960s.

The Archigram concept proposed a ‘Plug-in city’ comprising an elevated city of personalised prefabricated capsule homes inserted into high-rise megastructures [13]. Archigram’s plug-In city concept intended to give people the flexibility and choice to customise their capsule homes. Metabolist aimed to develop a living, self-generating system that could adapt over time [13]. Friedman’s work provided the concept of mobile architecture, creating spaces that people could take with them [13]. These futuristic groups worked on concepts that sought decoupling of the product and the location. These concepts did not translate into reality, perhaps due to technological limitations at that time and a lack of social acceptance. However, the authors argue that such visions may have also failed because of the disconnections of the ideas from the practical realities of the real estate market and the housing purchase behaviour.

## 4 The Proposed Approach to Decoupling Product and Location via Modular Construction

Figure 2 shows a schematic of the proposed solution approach, which has similarities with Archigram’s ‘Plug-in City’ [13] and Pasquale et al.’s [1] hybrid modular construction. The proposed solution comprises a building frame fixed on a location, but which can host independent, replaceable PPVC modules. The building frames have integrated hoisting mechanisms that allow PPVC modules to be plugged in or out anytime during the building lifecycle. The removable modules retain lifecycle modularity, decoupling them from the location.

<figure><img src="image_3.png" /><figcaption>Fig. 2. Plug-in-plug-out system of modularity</figcaption></figure>

The proposition to decouple the built asset from its location is driven by the following factors:

*Improve the Housing Product Quality:* Decoupling of the housing product and its location should lead to independent emphasis on product quality. As technologies and societal trends change, the built spaces will also require frequent updates to meet the desired performance and functions [1, 5]. With a decoupling approach, replacing the existing modules with advanced technical, societal, and functional units should be possible.
*Enhance Variety and Choice:* Decoupling will provide greater flexibility and choice for customers to select individual units that meet their changing needs, budget, and design requirements across the lifecycle.

*Enhance Adaptability at The City Level:* Decoupling the product from the location will create a system-level opportunity to adapt at the city.

*Enhance Recourse Efficiency:* The ability to share modules or locations will enable greater resource sharing and efficiency at the systems level, consistent with trends in sharing economy.

# 5 Discussion and Justifications

Figure 3 summarizes the observations and trends leading to the proposed objective of seeking greater value in the built environment through decoupling. The trends suggest that apart from the technological aspects, the real estate market, business, culture, and global trends are notable factors that influence the adoption of construction technologies in practice.

<figure><img src="image_4.png" /><figcaption>Fig. 3. Summary of trends leading to the need for greater value generation in the built environment</figcaption></figure>

The following paragraphs explain how some of these trends and observations can be accounted for in the proposed solution approach that seeks to leverage modularity to decouple the building product from the location.
**5.1 Advantages of Lifecycle Modularity and Delayed Differentiation**

Delayed differentiation is postponing the products assembly late in the supply chain to have cost benefits, reduce inventory, tackle uncertainty in demands, and high product availability and variety [14, 15].

In traditional PPVC modular construction, all the PPVC modules in a single building are assembled at the construction point. Some level of delayed differentiation is available to the end customer until the point when the building is constructed. In contrast, the individual modular units are never permanently fixed to the building frame in the proposed plug-in-plug-out approach. The lifecycle modularity should allow greater delayed differentiation as the customers can choose their own customized units even after the building frame is constructed. The lifecycle modularity will enable reuse, recycling, and disposal [14] of PPVC units at any time, allowing a continued opportunity for differentiation.

**5.2 Future Technology Drivers in Construction and the Global Social Trends**

Singh [16] argued that the built environment research and practice needs a systemic approach along with a technology-based vision of the future of construction. Quoting a World Economic Forum report that identified several technological advancements and global trends that are likely to shape the future of construction, Singh [16] argues that the construction sector needs solutions that can combine technical advancements with global trends. Hence, it is desirable to seek approaches that can integrate technical advancements such as prefabrication and PPVC, digitalization, and wireless technologies with social trends such as sharing economy, resource efficiency, and lifecycle management.

Social trends are also reflected in the urban lifestyle. The younger generations want the spaces to be flexible, adaptive, resource-effective, and technology-oriented [1, 5]. Technology changes how we think, socialise, live, and work. Some noticeable global trends include temporality, mobility, agility, activity-based working, X-as-a-service, plug-in plug-out products, co-working, co-living, etc. [1]. Companies such as Airbnb and WeWork offer a flexible urban lifestyle. The real estate industry is going through a form factor change [17]. A similar desire for flexibility and resource efficiency is observable in other markets such as car-pooling because it adds value to the customer. Decoupling the housing units from the location can be one way to create such flexibility and adaptability in the real estate market.

The trends toward decoupling are also observable in areas such as mobile architecture, adaptable spaces, tiny houses, and modular pods[18, 19]. Each of these solutions can be clubbed in the category of volumetric modular solutions. Such flexible spaces are equally applicable in indoor and external environments. In parallel, outside the built environment discussion, modular volumetric solutions such as Mobile Health Units (MHUs) are increasingly used to improve public infrastructure in remote locations [20]. There is also a growing interest in the mobility domain of autonomous spaces, extending the scope of modular spaces. In addition to the physical spatial solutions, service-oriented spatial solutions such as space-as-a-service have emerged [21]. The ideas of shared economy and shared resources have emerged in built environment, mainly via innovations in real estate. Such service-oriented models also lead to greater use of modular spaces such as meeting pods.
The decoupling approach also seeks to bridge the silos of sub-disciplines within the construction industry, namely, architecture, construction, facilities management, and real estate and property management. For instance, Korkmaz [22] discusses the concept of kinetic architecture in which buildings are designed to allow parts of the structure to move. Dynamic design is an under-explored in construction. Whereas re-configurable spaces are increasingly desired in modern real estate. A built environment ecosystem that supports kinetic architecture at the city-level offers new growth opportunities in the construction industry.

## 5.3 Spatial Efficiency and Resource Efficiency

There is increasing housing demand in cities like Shanghai and Delhi with the growing urban population. Innovative solutions are needed for the effective use of new and existing spaces. Building occupancy rate is one way to assess the efficiency of building resources. The current occupancy rates across educational, residential and office buildings is less than 0.35. One crucial reason for such a low occupancy rate is that buildings are designed to serve a specific function. This results in building resources that remain unused for large amounts of time. In contrast, the proposed decoupling approach can enable multi-functional use of locations with adaptable and mobile spaces, raising the overall efficiency and occupancy rates.

# 6 Conclusions and Future Research

The coupling of building housing with location seems to be a fundamental limitation in construction. Decoupling the building housing from the location offers new growth opportunities, commensurate with trends such as sharing economy, resource efficiency, adaptability, and flexibility. Decoupling will build upon and offer lifecycle modularity in housing solutions. However, several challenges remain to be investigated and tested to take the proposed vision forward. First, the technical feasibility of the proposed approach needs to be tested. Second, the social desirability of such a solution needs investigation and validation. Third, the market viability of the proposed solution needs to be assessed to check whether a sound business case can be made for the proposed solution such that it creates and meets market demand.

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