NEW DELHI — India is grappling with a severe urban affordable housing shortage of 9.4 million units, a gap that could explode to 30 million by 2030 if urgent reforms aren’t made. This dire warning comes from a new report, “India Affordable Housing: Tackling Urban Housing Deficit Through Supply-Side Reforms,” released by the National Real Estate Development Council (NAREDCO) and Knight Frank India.
The report highlights a sharp decline in the supply of new affordable homes, despite government initiatives like the Pradhan Mantri Awas Yojana. The data shows that homes priced under ₹5 million accounted for over half of new launches in 2018 (52.4%), but that number has plummeted to just 17% in 2025 across India’s top eight cities.
Financial pressures on potential homebuyers are also mounting. According to the report, the EMI-to-income ratio for low-income households has jumped from 43% in 2020 to 60% in 2025. For middle-income households, it rose from 28% to 40% in the same period, squeezing out a large number of buyers.
The Biggest Barriers to Building
The report identifies several key reasons for this crisis:
- High land costs: This is a major deterrent for developers looking to build affordable homes.
- Weak private equity participation: The affordable housing sector attracted only $1.9 billion in private investment between 2011 and 2024, less than 8% of the total for residential real estate.
- Cumbersome approval processes: Complex and slow procedures make it difficult for projects to get off the ground.
- Inadequate urban infrastructure: Lack of proper infrastructure in new development areas is a significant obstacle.
The Chairman and Managing Director of Knight Frank India, Shishir Baijal, emphasized that affordable housing is not just a social priority but an “economic necessity.” He stressed the need to move beyond demand-side policies and focus on removing these supply-side barriers.
Potential Solutions and Government’s Perspective
The report offers several solutions, including:
- Repurposing vacant government land for mass housing.
- Expanding free Floor Space Index (FSI) to increase supply and reduce costs. The report suggests that a 50% increase in FSI could boost supply by the same amount and lower construction costs by 24%.
- Providing subsidized construction finance and stronger tax incentives for developers.
However, a senior government official offered a different view. At a panel discussion, Kuldeep Narayan, the Joint Secretary of the Ministry of Housing and Urban Affairs, stated that uncapping FSI is not a “silver bullet solution.” Instead, he suggested that state-level mandates that require developers to build affordable housing as part of larger projects are more effective. He highlighted that a good “shelter fee” model—where a developer pays a fee instead of building on-site—works best when about 40% of builders choose to construct affordable housing and 60% opt to pay the fee.