India is confronting a significant affordable housing deficit, with a shortage of 9.4 million units in 2025 that is projected to expand to 30 million by 2030 if current trends persist. The widening gap stems from rising demand, slowing new supply, and muted private sector investment, according to a Knight Frank report released at the 17th NAREDCO National Convention in New Delhi.
The report titled Affordable Housing: Tackling Urban Housing Deficit Through Supply-Side Reforms highlights that nearly 80 per cent of the demand is concentrated among the economically weaker section (EWS) and low-income group (LIG) households. Addressing this challenge, the report said, will require bold supply-side interventions through reforms in land use, construction finance, and regulatory processes.
Demand Rising, Supply Constrained
In the first half of 2025, the supply-to-demand ratio in affordable housing across the top eight cities fell sharply to 0.36, compared to 1.05 in 2019. The cities tracked include Mumbai, Delhi NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad. This indicates that while demand has grown steadily, new launches have failed to keep pace, widening the structural deficit.
The share of affordable housing, defined as units priced under ₹50 lakh, stood at just 17 per cent in 2025 (until June). This is a steep decline from 52.4 per cent in 2018, signalling that developers are increasingly shifting focus toward mid and premium housing categories, leaving the affordable segment underserved.
Government schemes such as the Pradhan Mantri Awas Yojana (PMAY), Affordable Rental Housing Complexes (ARHCs), and tax benefits have sustained demand, but developers continue to face significant hurdles. High land acquisition costs, infrastructure gaps in suburban areas, and limited access to construction finance remain the key bottlenecks limiting fresh supply.
Suggested Reforms
The report identifies three primary solutions to bridge the affordable housing gap. First, repurposing underutilised public sector undertaking (PSU) land for housing development through public–private partnerships (PPPs) could unlock large tracts of land at reasonable costs. Second, rationalising floor space index (FSI) norms would enable higher density construction, reducing per-unit costs and improving supply viability. Third, extending subsidised construction finance to developers could help lower project costs and attract greater private participation.
Knight Frank noted that global examples demonstrate how subsidised finance and regulatory support can make affordable housing projects viable while drawing institutional capital. The report stressed that such measures, if applied systematically, could help India accelerate housing supply in line with demand growth over the next five years.
Investment Lagging Behind
Private investment in the affordable housing sector remains limited. Between 2011 and 2024, just $1.9 billion of private equity was invested in the segment, accounting for only 7.8 per cent of total residential inflows. Of this, foreign investors contributed merely 10 per cent, reflecting the sector’s inability to attract long-term institutional capital.
Industry stakeholders at the NAREDCO convention highlighted that unless financial incentives and regulatory reforms are implemented, affordable housing will remain unattractive to private players. They pointed out that creating an enabling ecosystem where projects are both viable and scalable is essential to narrow the deficit.
Industry Views
Shishir Baijal, Chairman and Managing Director of Knight Frank India, said that while demand-side policies such as PMAY have been commendable, the central challenge lies in supply. He stressed that unlocking land, improving financing access, and ensuring faster regulatory approvals will be critical to bridging the gap.
G Hari Babu, President of NAREDCO, emphasised that the convention provides the right platform to push for supply-side reforms. He argued that unlocking idle PSU land, rationalising FSI norms, and enabling subsidised finance could restore affordability and attract private participation. According to him, these measures would allow affordable housing to become a central driver of inclusive urban growth.
Gulam Zia, Senior Executive Director at Knight Frank India, noted that the steep decline in the supply-to-demand ratio underlines the urgency of structural reforms. He cautioned that unless specific incentives and innovative financing models are introduced, the shortfall in affordable housing is likely to persist and expand.
The report also stresses that addressing the housing deficit is not just a social obligation but also an economic necessity. Affordable housing supports workforce mobility, urban productivity, and overall economic competitiveness. Ensuring adequate supply would not only improve living standards but also align with India’s broader goal of sustainable and inclusive urban development.
The Knight Frank report concludes that without corrective measures, India’s affordable housing shortfall will triple to 30 million units by 2030, placing enormous strain on urban infrastructure and widening socio-economic inequalities. It recommends that public sector land repurposing, higher permissible FSI, and subsidised construction finance be treated as immediate policy priorities.
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