Zayd Noaman
Affordable housing lies at the heart of India’s urban growth story. For the world’s most populous nation, it is not just a social obligation but a powerful catalyst for jobs, investment and large-scale urban development.
As India’s major cities, including Bengaluru, continue to draw talent from across the country, access to affordable housing has become a key factor in shaping both quality of life and economic vitality. In this context, the affordable housing sector, despite its challenges, presents an unparalleled opportunity for nation-builders to drive innovation, foster collaboration and promote inclusive growth.
Rising costs but strong fundamentals
Over the past five years, rapid urban expansion in India’s prime housing markets has elevated land and construction costs to record levels, influencing investment patterns in the affordable housing segment. Between 2011 and 2024, less than 8% of total residential investment — around $1.9 billion — was directed toward affordable housing, even as construction costs rose by nearly 40% and labour expenses increased by about 150% since 2019.
At the current benchmark price of ₹45 lakh, the government-defined threshold for affordable housing under the Pradhan Mantri Awas Yojana, it has become increasingly challenging for developers to undertake new projects in major urban markets. The withdrawal of Section 80-IBA in 2022, which earlier provided full tax relief on profits from such projects, has added further pressure on viability.
Yet, the demand for affordable housing remains strong. This growing need presents a vital opportunity for policymakers, financiers and developers to work together on innovative solutions that can make this essential segment both sustainable and scalable.
Industry estimates indicate that India could face a shortfall of over 31 million affordable homes by 2030. Addressing this significant gap presents a powerful opportunity to drive balanced and inclusive national growth. The practical, collaborative, and forward-looking measures outlined below can help unlock this potential and create lasting, scalable solutions for the housing sector.
Since over 75% of India’s affordable housing demand is concentrated in just 10 States, including Karnataka, policymakers and developers here must collaborate closely to address unique local challenges, whether land availability, regulatory bottlenecks or financing gaps. Collaborative models between the public and private sectors can unlock serviced land for housing development. Strategic land allocation enhances project viability and attracts credible developers. This approach ensures that affordable housing projects are both sustainable and market-driven.
Improving infrastructure along city peripheries like better roads, metro links and utilities reduces travel time, unlocks developable land and lowers construction costs. This expansion of serviced land makes affordable housing projects more viable while encouraging balanced, sustainable urban growth.
Rise of nuclear families
Near Bengaluru, for instance, locations such as Kanakapura, Tumkur and Hoskote are rapidly gaining traction. Better connectivity via new highways and metro links combined with lower construction costs and a rising prevalence of nuclear families are driving demand in these corridors.
Re-evaluating the current ₹45 lakh threshold for affordable housing and introducing targeted incentives can stimulate new supply across key urban centres. Tailored benefits that reflect regional cost dynamics can help developers deliver more projects within reach of low- and middle-income buyers.
Streamlining regulatory processes through fast-track, single-window clearances, enhanced Floor Area Ratio allowances and rationalized development charges can significantly reduce project costs and timelines. A simplified approval framework creates a more predictable and investor-friendly environment.
Establishing a dedicated affordable housing fund can bring together banks and development finance institutions to provide long-term, low-cost capital. Such a mechanism would strengthen the financial ecosystem for affordable housing and ensure steady progress toward inclusive urban growth.
Reintroducing tax reliefs for principal and interest payments under the New Tax Regime can boost homebuyer confidence and stimulate end-user demand. Targeted support for first-time buyers can transform aspirations into ownership, creating a stronger base for social and economic mobility.
A powerful driver of growth, affordable housing creates jobs, strengthens local economies and supports city-scale infrastructure. Every home built generates opportunity across industries, encouraging investment and long-term development.
Through thoughtful policy, close collaboration between government and developers and innovative financing, India can deliver quality homes at scale while maintaining developer viability.
With liberal land-use policies, broader financing options for low- and middle-income groups and urban planning that promotes mixed-income communities, the dream of home ownership can become a reality for millions.
The writer is president, CREDAI Bengaluru.
Published – December 05, 2025 06:17 pm IST