Housing Affordability in Urban India

UPSC Syllabus Topic: GS Paper 3 –Infrastructure

Introduction

Housing affordability in urban India has emerged as a serious urban challenge, with home ownership slipping beyond the reach of most city residents. Despite rising urbanisation, housing prices are driven less by construction costs and more by land speculation, weak land policies, and real estate–led development. As housing shifts from a social necessity to a financial asset, cities increasingly witness a paradox of vacant homes alongside overcrowded settlements, deepening inequality and urban exclusion.

Reasons for the Urban Housing Crisis in India

1. Land cost dominates housing prices: The selling price of urban housing is driven mainly by land value and location advantage. Construction costs form only a small share, while high land prices and developer profits push final housing prices very high.
2. Speculative land holding: Land is often purchased at low prices and held until cities expand. Owners then seek higher FAR permissions to build more and sell at inflated prices, increasing unaffordability.
3. Weak urban land policy: State and city land policies allow speculation to shape housing supply, turning affordable housing into a high-value asset rather than a basic service.
4. Housing treated as a financial asset: Urban housing increasingly functions as a store of value rather than a place to live. Apartments are parked, land is hoarded, and supply responds to purchasing power instead of actual housing need.
5. Paradox of vacancy and shortage: Cities show a clear contradiction where lakhs of vacant houses coexist with overcrowded slums, as housing is built in the wrong location, form, and price range.
6. Real estate–led urban development model: Urban growth over the last three decades has relied heavily on real estate markets, with the state acting largely as a facilitator rather than a provider of affordable housing.

Impact of the Urban Housing Crisis in India

1. Permanent insecurity for urban residents: When housing becomes unaffordable, urban life turns unstable. Families postpone education, healthcare, and social mobility merely to manage rent.
2. Forced informality in cities: Many migrants cannot afford formal housing and remain unregistered, invisible, and excluded from political and civic systems.
3. Erosion of urban citizenship: Housing exclusion weakens the right to the city, as people who cannot live securely lose the ability to shape urban life and decision-making.
4. Social segregation and ghettoisation: Urban housing patterns are creating sharp social divisions, with marginalised groups, including Dalits and Muslims, pushed into segregated settlements.
5. Exclusion of essential workers: Workers who build and sustain cities—such as construction, sanitation, and care workers—are systematically denied the right to live within the cities they serve.
6. Intergenerational impact on children: Children inherit not only poverty but also housing instability, limiting future opportunities and deepening long-term inequality.

What Should Be Done

1. Bring vacant housing into use: Vacant houses and underutilised land must be mobilised. Anti-speculation measures can reduce hoarding and increase effective housing supply.
2. Reform land taxation systems: Higher taxes on unoccupied housing and lower taxes on occupied homes can discourage speculative holding and promote actual use.
3. Make land policy central to reform: Land policy should focus on social outcomes rather than only revenue, curbing speculation while prioritising access and affordability.
4. Expand affordable rental housing: Ownership is not essential for stability. Affordable rental housing in well-located areas can support workers, migrants, and young families.
5. Learn from global public housing models:

• Large-scale public housing initiatives show how land can be taken out of speculative markets and used for social outcomes.
• In Singapore, the state preserved land at regulated prices and developed mass affordable housing, ensuring that 70–80% of the population could access secure, well-located homes connected to jobs and urban services.
• Similarly, in Dutch, housing regulations require every private development to allocate a mandatory share for social housing, with prices capped well below market rates.
• India can adapt these models by preserving land for public housing, mandating inclusionary zoning, and prioritising affordable rental housing in central locations to integrate low- and middle-income groups into the urban economy.

Limits of Transit-Led Housing Solutions

1. Transit works only with full services: Transport links are effective only when new locations also provide schools, healthcare, and jobs. Transit alone cannot solve housing exclusion.
2. Risk of pushing the poor outward: New housing supply often shifts low-income groups to city peripheries, raising commuting costs and breaking social networks.
3. Need for integrated town planning: Successful urban expansion integrates housing, employment, amenities, and transport. Isolated housing developments worsen exclusion.
4. Market-only logic is insufficient: Viewing land primarily as a revenue source misses the true purpose of cities. Urban planning must aim for shared growth and spatial justice.

Conclusion

Urban housing unaffordability in India reflects deep failures in land policy and city planning. Housing has shifted from a social need to a speculative asset. Addressing this crisis requires strong political will, firm regulation of land and housing markets, and a clear commitment to affordable, well-located homes that promote stability, inclusion, and equal urban citizenship for all.

Question for practice:

Discuss how land policy, real estate–led urban development, and the financialisation of housing have contributed to housing unaffordability in urban India and examine their social consequences.

Source: The Hindu