Affordable housing deficit may hit 30 mn by 2030; PSU land, FSI reform and subsidised finance seen as key solutions

India faces an affordable housing shortfall of 9.4 million units, a gap expected to swell to 30 million by 2030. While demand continues to rise, new supply has slowed, and limited private investment has further widened the deficit. Closing this gap will require bold reforms and coordinated efforts by government, developers, financial institutions, and civil society, a report has said.

India faces a 9.4 mn affordable housing shortfall, set to hit 30 mn by 2030, with slow supply and low private investment widening the gap. (Photo for representational purposes only)(Pixabay)

Recommended measures include repurposing idle PSU land through public–private partnerships, rationalising floor space index (FSI) norms to boost supply and cut costs, and extending subsidised construction finance to developers, a report by Knight Frank said on August 29.

In the first half of 2025, India’s affordable housing sector is under severe pressure, with the supply-to-demand ratio falling to 0.36 from 1.05 in 2019 across the top eight cities, according to a report released by Knight Frank India at the 17th NAREDCO National Convention held in the capital.

Mumbai, Delhi NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad are among the top eight cities.

The report titled Affordable Housing: Tackling Urban Housing Deficit Through Supply-Side Reforms has said that while demand for affordable homes continues to climb, new launches have slowed significantly, leaving a widening gap between what buyers need and what developers are delivering. India currently faces an urban affordable housing deficit of 9.4 million units, a figure projected to soar to 30 million by 2030, with nearly 80% of demand concentrated among economically weaker sections (EWS) and low-income groups (LIG), the report said.

Also Read: Tier 2 cities offer affordable housing options, ease EMI burden, while metro buyers struggle with rising costs

Demand is strong, supply is constrained

In 2025 (until June), the share of affordable housing, or the value of housing units priced under ₹50 lakh, stood at 17%, a sharp decline from 52.4% in 2018. Thus, this indicates a decline in affordable housing supply in Indian cities. The declining number of launches in affordable housing units is primarily attributed to the bottlenecks hindering private participation.

The report said that schemes like the Pradhan Mantri Awas Yojana (PMAY), Affordable Rental Housing Complexes (ARHCs), and tax benefits have helped sustain demand. However, developers remain constrained by high land prices, limited access to construction finance, and infrastructure bottlenecks in peripheral areas.

“Affordable housing is not only a social priority but also an economic necessity,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India. “While demand-side policies have been commendable, the real challenge lies on the supply side. Unlocking land, improving financing, and faster approvals will be key to bridging the gap.”

Also Read: Housing affordability: Ahmedabad, Pune, and Kolkata lead as Mumbai sees improvement

Investment lagging behind

Private equity inflows into affordable housing have remained muted, with just $1.9 billion invested between 2011 and 2024, only 7.8% of total residential inflows. Foreign investors accounted for just 10% of this figure, signalling the segment’s limited ability to attract institutional capital, the report pointed out.

G Hari Babu, president, NAREDCO, said that limited private investment further widens the gap. “This convention is the right platform to call for bold supply-side reforms, unlocking PSU land for housing, rationalising FSI norms, and enabling subsidised construction finance. These measures can restore affordability, attract private participation, and ensure that affordable housing becomes the real engine of inclusive urban growth in India.”

Gulam Zia, senior executive director, advisory, valuation and research at Knight Frank India, said the steep fall in the supply-to-demand ratio highlights the pressing need for structural reforms. He cautioned that unless specific incentives and innovative financing models are introduced, the affordable housing segment will continue to face a shortfall.

The report emphasised that unlocking affordable housing supply will require bold reforms and collaborative efforts among government, developers, financial institutions, and civil society. It recommends repurposing vacant PSU lands for affordable housing through public-private partnerships, increasing the free floor space index (FSI) to boost supply and reduce costs, and providing subsidised construction finance to developers, drawing on successful global models from project viability and attracting greater institutional capital is also seen as critical.

“Together, these measures can create an enabling ecosystem where private participation becomes financially feasible, ensuring that affordable housing supply not only meets the growing demand but also supports India’s long-term vision of inclusive and sustainable urban development,” it said.

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