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Housing

India Faces Urban Affordable Housing Shortage of 9.4 Million Units

Strategic Insights

— 2 min read

India's urban affordable housing shortage has swelled to 9.4 million units, a figure that could reach 30 million by 2030 if urgent reforms are not undertaken. Despite government initiatives such as the Pradhan Mantri Awas Yojana, supply has declined, and affordable homes priced below Rs.5 million accounted for only 17% of new launches in 2025, down from 52.4% in 2018. Rising house prices and fluctuating lending rates have squeezed low-income buyers out of the market, while high land costs, weak private equity participation, and cumbersome approval processes hinder supply.

Key Takeaways:

  • The urban affordable housing shortage in India has reached 9.4 million units, a figure that could increase to 30 million by 2030 without reforms.
  • Despite government initiatives, supply has declined, and affordable homes priced below Rs.5 million accounted for only 17% of new launches in 2025.
  • Rising house prices and fluctuating lending rates have led to an EMI-to-income ratio of 60% for Economically Weaker Section (EWS) households and 40% for middle-income households.
  • High land costs, weak private equity participation, and cumbersome approval processes are the biggest barriers to scaling up supply.
  • Affordable housing attracted only $1.9 billion in private equity inflows between 2011 and 2024, less than 8% of total investment in the residential sector.
  • The report recommended solutions such as repurposing vacant government/public sector undertaking land for mass housing, expanding free floor space index (FSI), and offering stronger tax incentives to developers.
  • State-level norms that mandate developers to build affordable housing beyond a particular size of projects on-site or within the vicinity of such projects work better, and a good shelter fee is when 40% of builders construct affordable housing and 60% give shelter fee.
  • Transferable development rights (TDR) for affordable housing can be a viable solution, but the actual cost of building affordable housing is a constraint.

Statistics:

  • 9.4 million units: The current urban affordable housing shortage in India.
  • 30 million units: The projected urban affordable housing shortage by 2030 without reforms.
  • 52.4%: The percentage of new launches in 2018 that were priced below Rs.5 million.
  • 17%: The percentage of new launches in 2025 that were priced below Rs.5 million.
  • 60%: The EMI-to-income ratio for Economically Weaker Section (EWS) households in 2025.
  • 40%: The EMI-to-income ratio for middle-income households in 2025.
  • $1.9 billion: The private equity inflows attracted by affordable housing between 2011 and 2024.
  • 8%: The percentage of total investment in the residential sector that affordable housing attracted between 2011 and 2024.
  • 50%: The increase in supply that would result from increasing the base or free floor space index (FSI) by 50%.
  • 24%: The reduction in the overall cost of construction of a dwelling that would result from increasing the base or free FSI by 50%.

Sources:

  • National Real Estate Development Council (NAREDCO)
  • Knight Frank India
  • Hindustan Times
  • Ministry of Housing and Urban Affairs (MoHUA)
  • Joint Secretary, Ministry of Housing and Urban Affairs, Kuldeep Narayan

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