Challenges in Urban Housing in India

India faces significant challenges in urban housing, not just due to inadequate credit or home-ownership schemes, but also due to the economic infeasibility of building affordable homes. This leads to the proliferation of informal settlements, long commutes, and higher household debts.

Factors Contributing to Housing Challenges

• High land costs.
• Restrictive planning norms.
• Weak rental markets and regulatory delays.
• Withdrawal of fiscal incentives for developers and financiers.

Current Market Dynamics

The market for affordable housing is considered high-risk and low-return, attracting less than 8% of residential private equity and only 10.2% of foreign investment inflows.

• The supply-to-demand ratio for homes priced below ₹50 lakh in top eight cities dropped from 1.05 in 2019 to 0.36 in the first half of 2025.
• The share of affordable housing in new supply has decreased to 17% from over 50% in 2018.
• There is an estimated shortage of 9.4 million units in urban affordable housing.
• Projected cumulative demand is expected to reach 30 million units by 2030.

NITI Aayog's Proposals for Affordable Housing

The NITI Aayog report suggests several reforms to reset affordable housing policy:

• Revival of Section 80-IBA: Reintroducing tax exemptions for developers on profits from approved affordable housing projects.
• Exemptions for Reits: Tax exemptions for rental income and capital gains to attract institutional investment.
• National Housing Bank (NHB) Bonds: Issuing tax-free bonds to fund concessionary lending for economically weaker sections (EWS) and lower-income groups (LIGs).
• Inclusionary Zoning: Mandating 10-15% EWS/LIG housing in large projects.
• Other Incentives: Waivers on stamp duty, registration charges, and change-of-land-use charges; incentives for using permissible floor area ratio for affordable units.
• Rental Housing Reclassification: Treating rental housing as residential to lower utility tariffs.

Implementation Challenges and Global Best Practices

Successful implementation depends on the cooperation of states and cities. International examples demonstrate various strategies for affordable housing:

• 3D printed homes in Kenya.
• Community engagement models in Nepal.
• Utilizing public land for housing projects.
• Rationalizing floor space index (FSI) norms.
• Investments in transport and peripheral infrastructure.
• Developing technology-enabled housing data systems.