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Managing Urbanisation
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A COMPREHENSIVE
FRAMEWORK
TO PROMOTE AFFORDABLE
HOUSING This Work is licenced under a Creative Commons
Attribution-NonCommercial-ShareAlike
4.0 International Licence.
Some right reserved
A COMPREHENSIVE
FRAMEWORK TO PROMOTE
AFFORDABLE HOUSING
Published on: December, 2025 A COMPREHENSIVE
FRAMEWORK
TO PROMOTE AFFORDABLE
HOUSING Preface
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Contents
1. BACKGROUND 10
1.1 Objective and Scope 11
1.2 Multiple definitions of affordable housing 11
1.3 Definition adopted by the Committee in this report 13
1.3.1 Improving livability 13
1.3.2 Affordability 13
1.4 Limitation of official data on affordable housing 15
2. CURRENT HOUSING SCENARIO 15
3. CHALLENGES IN HOUSING SECTOR 19
3.1 Land supply 19
3.2 Housing stock 19
3.3 Access to capital (demand and supply side) 20
3.4 Vacant house dilemma 20
3.5 Lower land consumption rate to population growth
rate (LCRPGR) in India 21
3.6 Other miscellaneous issues 21
4.CASE STUDIES 22
4.1 Brief overview of global best practices 22
4.2 Overview of best practices under PMAY-U: nationwide case studies 23
5. RECOMMENDATIONS 26
5.1 Strategic interventions to increase land supply 27
5.1.1 Zoning reforms and dedicated zoning for affordable housing 27
5.1.2 FAR relaxation & building norms (ground coverage, setbacks & parking) 27
5.1.3 Expansion of planned urban areas 28
5.1.4 Transit-oriented development (TOD) and precinct Development 29
5.1.5 Transferable development rights (TDR) 30
5.1.6 Creating land banks 31 5.2 Increase supply of affordable housing stock 32
5.2.1 Rental housing for industrial workers 32
5.2.2 Reservation for EWS/LIG housing in all real estate projects and
creation of state shelter fund 32
5.2.3 Policy for creation of a dedicated fund for affordable rental housing 33
5.2.4 Reforms in rental housing legal framework 34
5.2.5 Rationalization of municipal service charge for affordable rental
housing provided by Institutions/companies 36
5.3 Access to capital 36
5.3.1 Incentivize affordable housing projects by restoring section 80-IBA 36
5.3.2 Tax incentives for affordable housing REITs 36
5.3.3 Enhanced credit guarantee for buyers 37
5.3.4 Lower interest rate through tax free bonds 37
5.3.5 Land use charge exemption 37
5.3.6 Stamp duty and registration charge exemption 37
5.4 Other Recommendations 37
5.4.1 Promoting ease of doing business 38
5.4.2 Evidence-based planning -tackling the data gap 38
5.4.3 Capacity building 38
5.4.4 Innovative underwriting practice 38
5.4.5 Provision for O&M support 38
6. NUDGING STATES THROUGH REFORM-LINKED FINANCIAL
INCENTIVES 44
7. CONCLUSION 45
ANNEXURE 1 46
ANNEXURE 2 48 10
1. Background
India is urbanising at an unprecedented pace.
As of 2021, 35% of the population resides in
urban areas, a figure projected to reach 50%
by 2050
1
. This rapid growth is expected to lead
to a significant increase in the demand for
urban housing. Urban population estimated
at 50 crore in 2021 is expected to reach 85
crore by 2050. The dynamics of real estate
sector would amongst other factors play a
significant role in creating the demand for
urban housing.
The real estate sector is a significant pillar of
the Indian economy and its contribution is
projected to rise steadily from approximately
7% to India’s GDP in 2021 to approximately
13% by 2050. This anticipated growth
reflects the sector’s expanding role in urban
development, employment generation,
infrastructure creation, and housing.
Real estate differs from other sectors due
to its unique characteristics and structural
inefficiencies. Unlike traditional markets,
the demand-supply equation in real estate
often fails to align efficiently. Low rental
yields discourage rental housing and fuel
speculative investment in land. With land
costs forming 40-50% of project expenses in
metros, often financed outside formal credit,
the sector remains highly capital-intensive.
Construction finance is costly, limiting smaller
developers. Demand is localized, shaped by
infrastructure and job hubs, while archaic
tenancy laws and low rental yields further
constrain the formalisation of rental housing
market.
Government of India has launched multiple
initiatives to address the housing challenge.
Yet, despite numerous schemes, informal
settlements continue to grow, reflecting
the gap between the housing needs of low-
income groups and their ability to afford
formal housing. Going forward, demand for
affordable housing segment is unlikely to be
met by market forces alone, necessitating
specific government policy interventions.
1
Reforms in Urban Planning capacity in India, 2021; NITI Aayog 11
In the last decade, the Pradhan Mantri
Awas Yojana-Urban (PMAY-U) supported
the construction of nearly 1.12 crore houses
of which 96 lakh houses are complete. In
2024, PMAY-U 2.0 has also been launched
to support 1 crore additional household
of urban area with a focus on reform by
linking the benefit under the scheme with
notification of ‘Affordable Housing Policy’ by
the State Government concerned. However,
these schemes are mostly demand-driven
programmatic interventions and thus not
geared at ensuring a targeted supply of
affordable housing supported by policy
reforms. Data shows that formal housing
market remains skewed toward middle and
high-income groups, with limited supply for
the EWS and LIG.
Recognizing this gap, a committee comprising
NITI Aayog, Ministry of Housing and Urban
Affairs (MoHUA), Department of Financial
Services (DFS), and subject matter experts
was constituted under the chairpersonship
of Principal Economic Adviser, NITI Aayog.
The Committee was mandated to prepare a
detailed paper proposing a comprehensive
framework to promote and enable affordable
housing in India. The composition and Terms
of Reference (ToR) of the Committee are
provided in Annexure 1.
1.1 Objective and Scope
»The goal of this paper is to prepare a
comprehensive framework to promote
and enable affordable housing in India’s
urban areas.
»
The objective is to provide actionable
recommendations that can guide both
national and state-level efforts in:
◆Scaling affordable housing supply,
◆Improving access,
◆Streamlining processes, and
◆
Fostering sustainable and inclusive urban
growth
The scope was specifically on promoting
affordable housing in urban areas.
1.2 Multiple definitions of
affordable housing
The Committee in the first instance noted the
lack of any uniform definition of affordable
housing, with multiple definitions being used
in different context, formulated for varied
policy, financial, and programmatic purposes.
These definitions were systematically
reviewed by the Committee to develop a
comprehensive understanding of the subject,
its diverse applications and recommend a
uniform definition for purposes of this report.
Definition of affordable housing used
in various policies & reports of the GOI:
»National Urban Housing & Habitat
Policy (NUHHP), 2007: Instead of giving a
definition of affordable housing, the report
underscores the objective of making
housing accessible to EWS, LIG, and the
marginalized communities
2
.
»
Report of the High-Level Task force on
Affordable Housing for All, 2008: The Task
Force proposed a combination of criteria
based on: (i) household gross annual
income, (ii) size of the dwelling unit, and (iii)
EMI or rent as a percentage of household
income to identify the beneficiaries of
affordable housing. The Task Force also
concluded that prescribing a single,
uniform definition of affordable housing
would be counterproductive given India’s
socio-economic diversity
3
.
»
Draft National Urban Rental Housing
Policy (NURHP), 2015: Draft Policy, 2015,
recognised that affordable housing
need not be confined to ownership
and recommended a rental housing
framework for EWS, LIG, and other
vulnerable groups, addressing “need-
based rentals” for migrant workers,
2
National Urban Housing & Habitat Policy (NUHHP), 2007
3
Report of the High-Level Task force on Affordable Housing for All, 2008 12Contents
students, and government or public-sector
employees4.
Pradhan Mantri Awas Yojana Urban
(PMAY- U) 2.0, 2024:
A dwelling unit with a carpet area of up to
60 sqm in metropolitan cities and 90 sqm in
non-metropolitan areas, and a total value not
exceeding ₹45 lakh, is considered within the
affordable housing category.
Furthermore, the target beneficiaries i.e. EWS
(Annual household income < ₹ 3 lakhs), LIG (₹
3-6 lakhs) and MIG (< ₹ 9 lakhs) are classified
by income segments to ensure that benefits
and incentives are appropriately aligned to
each category with special focus on EWS.
Reserve Bank of India (RBI) - for
affordable housing for priority sector
lending (PSL) (
updated in april 2025)
The guidelines mandate location based on
population and cost of a dwelling to determine
the eligibility of individuals to seek bank loans
under the category of affordable housing in
urban areas. The guidelines updated5 in 2025
have increased the limits by 60-80%. Present
guidelines provide following limits:
Goods and Services Act, 2019:
The Act in its intent to promote affordable
housing mandates preferential rates
applicable for smaller dwellings based on the
criteria of area, cost and location as follows:
◆Maximum house value: ≤ ₹45 lakh
◆Maximum carpet area in metropolitan
cities: ≤ 60 sq. m
◆Maximum carpet area in non-metropoli-
tan cities: ≤ 90 sq. m
Harmonized Master List of
Infrastructure Sub sector – Department
of Economic Affairs, Ministry of Finance
October 2022:
Affordable housing projects are defined as
those in which “at least 50% of the permissible
Floor Area Ratio (FAR) or Floor Space Index
(FSI) is allocated to dwelling units with a
carpet area not exceeding 60 sq. m”
Population centric criteria Max Housing Loans Max Property Cost
Centres with pop. ≥ 50 lakh5063
Centres with pop. 10-50 lakh4557
Centres with pop. <10 lakh35 44
(Amount in ₹ lakh)
4 Draft National Urban Rental Housing Policy (NURHP), 2015
5 Reserve Bank of India (RBI) - for affordable housing for priority sector lending 13
1.3 Definition adopted by the
Committee in this report
1.3.1 Improving livability
Towards improving livability the Committee
proposed the goal of ensuring that every
individual has access to safe housing,
essential services, and opportunities for
social and economic mobility. In any urban/
peri-urban context, it is upheld through
three critical pillars i.e. affordable and secure
housing, holistic urban planning to provide
basic amenities, and accessible public
transport. A balanced housing ecosystem
must support both ownership and rental
options, backed by accessible home loans
and protective legal frameworks. Urban
planning plays a crucial role in shaping
inclusive, livability communities by ensuring
access to jobs, education, healthcare, and
social infrastructure. Concepts like “walk
to work,” integrated vocational hubs, and
quality public spaces enhance community
wellbeing. Public transport, as a vital
connector, must be reliable, multimodal,
and affordable, enabling equal access to
opportunities. Transit-oriented development
and value capture financing models can
drive sustainable growth while preventing
displacement.
However, this report has given special focus
on, making affordable housing an integral
part of urban planning and ensuring that
quality of life, especially for the weakest
viz. EWS/LIG are not compromised while
planning and implementing of affordable
housing projects.
1.3.2 Affordability
Housing is generally deemed affordable
when a household spends less than 30-40%
of their income on housing related expenses.
Here, the term “housing related expenses” not
only limits to the cost of ownership of house
and payment for essential services such as
water and electricity but also includes cost of
accessing the housing i.e. the rental expenses.
Therefore, if the household can afford the
dwelling either through ownership or rent,
then it is assumed that the household has
access to affordable housing.
The information pertaining to city level
household income are usually not available.
Therefore, this Committee is under the
limitation to define affordable housing in
Indian context.
The Committee recognizes that prescribing
a standard, uniform definition of affordable
housing with diverse socio-economic
backgrounds, would be counterproductive.
However, for the purposes of this report, the
following working definitions have been
adopted:
◆
Affordable house: A dwelling unit
with a carpet area of up to 60 sq. m in
metropolitan cities and 90 sq. m in non-
metropolitan cities, with a value not
exceeding ₹60 lakh in metropolitan areas
and ₹45 lakh in non-metropolitan areas.
◆
Affordable housing project: A project
in which at least 50% of the permissible
Floor Area Ratio (FAR) or Floor Space
Index (FSI) is dedicated to affordable
housing dwelling units.
The term ‘Affordable Housing,’ used in this
report refers to the above definition. These
working definitions are broadly consistent
with prevailing government guidelines,
including those under the PMAY-U framework
and RBI’s Priority Sector Lending guidelines.
In its deliberations the Committee noted that
the EWS/LIG within the broader Affordable
Housing category face particular challenges
in accessing formal housing.
1.4 Limitation of official data
on affordable housing
The Committee also noted that India lacks a
comprehensive and up-to-date official data
on affordable housing – both on demand
and supply. In absence of official data, 14
various studies and reports have relied on
periodic estimates by international property
consultants, real estate service providers, and
select think tanks. However, these datasets
differ widely in scope, methodology, and time
frame, particularly for affordable housing.
Reference to affordable housing in various
government reports over time presents a
mixed picture and does not include the basis
or detailed methodology for the estimates.
The 11th Five Year Plan (2007–12) pegged the
shortage at 2.47 crore units. The Technical
Group on urban housing for the 12
th
Five Year
Plan in its Report submitted in 2012 revised
this to 1.88 crore. Since 2015, under PMAY-U,
construction of nearly 1.12 crore houses has
been supported of which 96 lakh houses are
complete, with 1 crore additional houses will
be supported under PMAY-U2.0 by 2029. In
addition to this, affordable houses have been
constructed under various state schemes
for which the Committee did not have
data readily available. However, PMAY-U is
demand-driven it does not maintain the data
on urban housing shortage. The Committee
could not also ascertain whether similar data
is maintained by any of the state government
agencies.
For any affordable housing policy to be
effective, it must be based on reliable
and actionable data. At present, there
is a significant gap in publicly available
information on the launch, construction, and
occupancy of affordable housing projects,
as well as on the dynamics of slums and
informal settlements. Similarly, there is no
reliable data available in public domain on
houses occupied/unoccupied on rent/owned
basis despite the fact that it is collected
during decadal census operations. Without
availability of such data, it becomes difficult
to assess the effectiveness of government
interventions, monitor progress, or identify
areas requiring urgent attention.
There are independent studies estimating
the urban housing demand in the housing
sector. A CII–Knight Frank report (Dec 2024)
projects a 3.12 crore urban deficit by 2030,
while FED estimates range between 5-7 crore
units. ‘Housing for All’ targets to add another
~ 3 crore units (1 crore urban, 2 crore rural) by
2029
6
.
These divergent estimates reflect not only
varied methodologies but also different
reference periods, making direct comparison
difficult. Government data emphasizes
sanctioned and completed stock, while
private studies capture latent and future
demand, often projecting a larger deficit. This
lack of convergence risks underestimating
the true challenge.
The Committee underscores the need
for a centralized, technology-enabled
housing database to support accurate
demand assessment and evidence-based
policymaking.
6 Urban: 1 Crore urban houses during FY 2024-25 to 2028-29. Scheme guidelines, September 2024
Rural: 2 Crore additional rural houses during FY 2024-25 to 2028-29. PIB Progress of PMAY-G Rural housing targets, July 2025 15
The current state of affordable housing in
India is best understood by looking at both
the scale of the shortage and the affordability
trends across geographies. Estimates of the
housing deficit vary considerably, depending
on the methodology adopted.
2. Current Housing Scenario
Source: FED analysis (https://data.worldbank.org/indicator/EN.POP.SLUM.UR.ZS.?locations-IN: https://assets.koma.com/
content/dam/pma/pdf/2014/92/Decoding-Housing-for-al-2922.pdf)
Note: Assumption of 3.7 individuals per household in urban areas and 4.7 in rural areas has been considered for calculation
of households from population
1. Defined as Delhi, Mumbai, Chennai Kolkata Bangalore, Hyderabad, Ahmedabad and Pure 2. Defined as cities with
population 1 lakhs as per Census 2011, 3. Defined as other urban centres
◆
Deficit has been estimated
based on UN reported
estimates of lack of formal
housing
◆
The estimates are based
the global methodology
on household deprivations
where the inhabitants suffer
one or more of the following
‘household deprivations: Lack
of access to Improved water
services, Lack of access to
improved sanitation facilities,
Lack of sufficient living area
◆
Number of houses is
calculated as balancing figure
Estimates as per global methodology of lack of urban formal housing can go as
as high as 5-7 crores
Metro ¹
Urban
2
5 2-3
2-3
(40-60%)
3.8 1.8-2.3
1.5-2
(40-50%)
4.8 ~3
~1.5
(30-40%)No. of
households
(Crores)
Available
Quality Houses
(Crores)
Deficit
(Crores)
Semi Urban
3
Total 13.5 7-85-7 16
While around 96 lakhs urban houses have
been constructed under PMAY-U since 2015,
in the absence of any authentic data of the
demand for such housing, the Committee
was not in a position to identify the gap in
this segment. However, approximating from
estimates given by different sources, even
without including the houses constructed
under state schemes, the Committee was of
the view that it can be safely proposed that
this segment remains significantly under-
served, requiring specific interventions from
the Government.
The picture becomes sharper when
affordability is examined at a more granular
level covering both supply side as well
as demand side factors. As per a study
undertaken by FED, on the supply side the
cost of constructing a typical 30 sq.m. house
rises steeply from ₹6-8 lakh in rural areas to
nearly ₹25 lakh in metros, a fourfold increase.
While construction costs remain broadly
comparable across geographies, the share of
land cost changes dramatically. In rural areas,
land contributes only 10% of the total cost,
but in metros it rises to 63%, with land alone
driving up housing prices.
The same study by FED indicated that this
cost escalation is not matched by household
income growth. Average monthly household
income in rural areas is about ₹20,000,
compared to ₹47,000 in metros - an increase
of roughly 135%. This increment is far lower
than the 300-400% jump in housing costs
across the same spectrum. As a result, even
with subsidies, a majority of metro and
urban households remain unable to afford
even a standard 30 sq.m. unit, whereas rural
households have been better able to benefit
from schemes due to lower land costs.
......................
+400%
Rural
Rural
Rural UrbanUrbanMetroMetroSemi
Urban
Semi
Urban
65%
90%
54%
37%
46%
63%
35%
10%
...................................
20,000
25
5 8 17 25
17
6-8
5
22,000
28,000
47,000
Urban MetroSemi
Urban
+135%
Meeting the demand for AH is particularly challenging in metro & urban
areas due to both supply side & demand side factors
...
Housing cost in urban
areas is higher by 3-4x...
...while Income is higher by only
50-100% in urban areas
...due to higher land cost...
Cost of typical 30 sq mtr house
(INR Lakh)
Ratio of Land and Other
Construction Cost (%)
Construction
Cost
Land
Cost
Monthly household Incomes (INR)
Source: FED analysis (https://www.mospi.gov.in/sites/default/files/publication reports/Report 591 HCES 2022-
23New.pdf. https://www.ice360.in/app/uploads/2021/06/ICE-360-Proposal.pdf. https://microdata.gov.in/NADA/
index.php/catalog/213). https://arsgroup.in/blog/average-house-construction-cost-in-india-per-square-feet.html
Note: Considered average income of urban and rural areas based on monthly per capita expenditure and savings
of 15% and 20% respectively. Urban income categorization to metro, urban and semi urban has been done based
on PRICE survey 17
Market data further illustrates the imbalance
in the housing sector. Over the last decade,
housing supply has become skewed
towards high-end and luxury units, while the
affordable segment has steadily declined.
16%
19%
20%
26%30%
35%
39%
40%
40%
33%
31%
202420232022202120202019
0%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10%
28%
26%
28%
28%
24%
21%
14%
13%
16%
16%
9%
6%
8%
3%
6%
7%
3%4%
11%
AffordableMid- endHigh-endLuxuryUltra-Luxury
Budget Segmentation: Affordable (< INR 40 Lakh), Mid-end (INR 40 Lakh - INR 80 Lakh), High-end (INR 80
Lakh - INR 1.5 Cr), Luxury (INR 1.5 Cr-INR 2.5 Cr), Ultra-luxury (> INR 2.5 Cr)
Source: Indian Residential Real Estate, Annual Report 2024, Anarock
High-end housing stock is increasing while the affordable segment
witnessed a gradual decline
There is an increasing gap in supply & demand in housing stocks over the
past decade in both Tier 1 & 2 cities
◊ There is a visible gap between new supply and total absorption over the past
decade (2010-2024), especially during and post COVID.
◊ Inventory overhang reduced shows faster clearance of unsold stock.
◊
The market is moving toward sellers' market (undersupply), especially in Tier-Il
cities, which could impact affordability if supply is not ramped up.
Source: PropEquity 2025 18
In Tier-I cities, inventory overhang has
reduced because higher-end stock is being
cleared faster and not because affordable
housing supply has increased. In Tier-II cities,
undersupply has pushed the sector into a
seller’s market, driving up prices and making
affordability even more elusive.
Another important aspect of the current
housing scenario is the anomaly due to vacant
houses. Urban India has close to 1 crore
houses lying vacant, which remain outside
the housing market due to low rental yields,
weak tenancy frameworks, and litigation risks.
This results in a mismatch where new housing
demand remains unmet even as a significant
number of constructed units go unused.
In summary, the current housing scenario in
India is marked by:
◆Lack of official estimates on unmet hous-
ing demand, especially in the affordable
housing segment. Wide variation in the
available estimates from other sources,
depending on whether quantity or depri-
vation-based quality measures are used.
◆
Steep cost escalation in urban areas,
driven largely by land, which makes units
unaffordable despite subsidies.
◆
Market skewness, with supply concen-
trated in higher-value segments and
affordable stock shrinking.
◆
Underutilization of existing homes, as
high vacancy persists alongside unmet
demand.
This sets the context for understanding why
affordable housing remains a pressing policy
priority and frames the ground for examining
the structural challenges discussed in the
next section. 19
3. Challenges in Housing
Sector
The Committee notes that the ambition of
ensuring access to adequate and affordable
housing in urban India continues to face
multiple systemic barriers, is driven by a vicious
cycle of limited availability, poor affordability
and inadequate access to finance. To enable
clear understanding, the Committee
considered the issues and challenges under
five broad categories: (i) Land Supply, (ii)
Housing Stock, (iii) Access to Capital, (iv)
Vacant house dilemma, (v) Lower Land
Consumption Rate to Population Growth
Rate in India and (vi) Other miscellaneous
issues. Each category captures a set of issues
that reinforce one another, collectively
constraining the emergence of a sustainable
and inclusive affordable housing ecosystem.
3.1 Land supply
»Limited availability of land: Urban master
plans have not been effective in making
land available for affordable housing. Weak
adoption of land pooling, inadequate
provision of trunk infrastructure, and
delays in land-use conversion have further
constrained supply.
»
Increasing land prices: Rapid appreciation
in urban land values has made projects
unviable which eventually leads to high
land acquisition costs accounting for 50-
70% of total project costs, a share far
higher than in comparable infrastructure
sectors. This disproportionate cost burden
effectively excludes 75–85% of urban
households from formal housing markets.
»High acquisition costs and formal credit
constraints: Developers struggle to secure
land at scale. Land purchases are rarely
supported by formal credit channels,
forcing reliance on high-cost finance.
»
Emerging informal slums: Inadequate
planned land supply has pushed expansion
into slums, unauthorized colonies, and
peri-urban fringes, reinforcing inequitable
growth patterns.
3.2 Housing stock
»Limited housing stock supply: Developers
consistently report that margins in the
EWS/LIG segment are too thin to justify
investment. As a result, private sector
activity has concentrated on MIG and
above, leaving low-income supply heavily
dependent on public schemes.
»
MIG crowding-out EWS/LIG: Smaller-
unit markets, which are meant for EWS/
LIG, are increasingly being purchased by
middle-income households due to higher
purchasing power, particularly in metro
regions. This development further adds
to the declining stock for the EWS/LIG
segment.
»
EWS/LIG affordability: Even units sized
60 sq.m. (in metros) and 90 sq.m. (in
non-metros), while technically classified
as “affordable” under PMAY-U, often,
dwellings even less than 60 sq.m., cost
₹30–40 lakh or more, placing them
beyond the reach of EWS/LIG households
who are defined as households having 20
annual incomes below ₹6 lakh.
»
Weak frameworks to promote rental
housing: Factors like location, poor
maintenance and high rents on account of
construction costs have limited the growth
of rental housing in the affordable housing
sector. Rent Control Acts have become
archaic and do not support development
of formal rental ecosystem.
3.3 Access to capital (demand
and supply side)
»Lack of credit history & stable income
for formal loans: A large proportion of
EWS/LIG households are self-employed or
informal workers with irregular incomes
with no formal credit history. This makes
them ineligible for bank loans, even
though they are the primary target for
affordable housing.
»
High interest rates for borrowing due to
perceived risks: For those who can access
loans, interest rates are higher due to
lenders’ perception of risk. Elevated EMIs
push households into financial distress
or deter them from home ownership
altogether.
»
Affordability gap despite subsidy: In
metros, 85% of households cannot afford
a 30 sq. m. house even after subsidy,
underscoring limits of demand-driven
subsidies.
»
High-risk perception for developers:
Affordable housing is regarded as a high-
risk, low-return segment. Banks and
NBFCs hesitate to lend, and when they
do, it is at higher rates and shorter tenures,
making projects financially unattractive
for investors and developers.
»
Lack of infra financing benefits: While
affordable housing has been given
infrastructure status, the affordable
housing projects have not been able
to leverage opportunities of ECB
access or Viability Gap Funding (VGF).
This inconsistency makes housing
less competitive compared to other
infrastructure sectors like roads or power.
»
Tax and regulatory barriers: Notional
capital gains taxation discourages
landowners in redevelopment projects,
while low rental yields and eviction
hurdles deter private rental investments.
3.4 Vacant house dilemma
»Vacant but unavailable housing: India
has nearly 1 crore vacant houses in urban
areas, but these remain locked due to low
rental yields, weak tenancy laws, and fear
of litigation, thereby denying housing to
those in need. Similarly, there are a number
of land parcels which are either vacant or
the built-up area is significantly lower than
the maximum permissible built-up area
»
Restrictive tenancy framework: Rent
control and tenancy laws in many states
discourage owners from renting out
properties, as repossessing houses can be
lengthy, uncertain, and costly.
◊
Litigation risks: Property owners fear
tenants overstaying, non-payment of
rent, and prolonged legal disputes,
which often leads them to keep houses
locked instead of leasing/renting them.
◊ Low rental yields: Rental returns in
most Indian cities are typically only
2–3% of property value annually,
offering limited incentive to rent
compared to capital appreciation.
◊
Informal occupancy patterns: The
absence of robust formal tenancy
mechanisms pushes both landlords and
tenants into informal arrangements,
increasing uncertainty and disputes.
◊
Impact on housing availability: This
combination of legal, economic,
and regulatory barriers prevents the
release of vacant housing stock into
the market, inflating demand-supply 21
gaps and pushing low- and middle-
income households into informal or
overcrowded housing.
»
These aspects drive out institutional
investment from the rental housing sector.
3.5 Lower land consumption
rate to population growth rate
(LCRPGR) in India
A persistently low LCRPGR can escalate land
values, fostering informal settlements, and
overburden existing infrastructure, even
where progressive regulatory tools such as
FARs are in place.
India’s urban land per person remains low
at 46 m² in 2020, compared to the global
average of 143 m². Between 2015 and 2020,
China’s Built-up Area (BuA) per person rose
by 20%, compared to 14% increase in India
during the same period.
LCRPGR data further highlight India’s lag,
with a rate of just 1.8 in 2019 significantly
lower than Thailand (3.3), China (4.3), and
Korea (3.9). Vietnam, (3.1). These comparative
benchmarks underscore the urgency of
accelerating planned city expansion in India
to improve land use efficiency, reduce land
price pressures, and align with global urban
development trends.
LCRPGR in SE Asian countries in 2019
3.6 Other miscellaneous issues
»Bias toward ownership models: Existing
policies overwhelmingly promote
ownership, even though rental housing is
a critical need for everyone especially for
migrants, industrial workers, and the urban
poor. This imbalance reduces flexibility in
meeting diverse housing needs.
»
Absence of authentic data: Lack of
authentic data on demand for affordable
housing hinders evidence-based
policymaking.
»
Fragmented governance: Affordable
housing spans multiple agencies (urban
local bodies, state housing boards,
development authorities, and financial
institutions), with overlapping mandates
and slow approval systems. This results in
procedural delays, weak coordination,
and poor accountability.
»
Short-term subsidy focus: Current
schemes prioritize upfront cost reduction
through subsidies, without addressing
long-term factors such as maintenance,
affordability over time, and the
sustainability of the housing stock.
»
Life cycle costs: The focus of government
schemes has not sufficiently addressed
the issue of meeting the maintenance
of houses made for the EWS categories,
especially in multi-storied dwellings
thus making them less attractive for the
beneficiaries.
These issues form a web of mutually
reinforcing structural barriers resulting
in limited success in urban areas, The
Committee, therefore, concludes that only a
comprehensive, market enabling and reform-
linked approach is needed to break this cycle.
Country LCRPGR
China 4.3
Korea 3.9
Thailand 3.3
Sri Lanka 3.4
Vietnam 3.1 22
4.Case Studies
4.1 Brief overview of global best practices
The Committee referred to the various global best practices for affordable housing as shown in
the following table. Further details are in Annexure – 2.
Country Approach Key InstrumentsImpact
Vienna
Public housing
through Rental
model
Capped land prices
1% interest public loans
Long-term rent
control
50% of population
lives in affordable
public/co-op
housing
Singapore
Hong Kong
Mass public housing
through Ownership
model
HDB/HA-owned supply
Integrated planning with
transit/jobs
Income-linked resale
& rental
70–80% population
in public flats
South Korea
High-density, state-
led mass housing.
Focus on rentals
(with ownership
options)
FAR relaxation (300%+)
State-led land acquisition
Public-private
development
Over 2 million homes
built in 1990s housing
drive
UK/
Germany/
France
Demand-side
support
Housing vouchers (APL,
Wohngeld)
Subsidized mortgages
(1–3%)
Digital benefit systems
Millions reached;
rapid disbursement
& private
developer role
United States
Tax-driven private
capital mobilization
Low-Income Housing Tax
Credit: 10-year federal tax
credits
Competitive state-level
allocations
Long-term affordability
mandates
3M+ affordable rental
units created since 1986
India
Demand-side
support
Subsidy provided to eligible
beneficiaries for purchase
of housing.
Rental subsidies provided
for beneficiaries opting for
the rental option.
9.6 million affordable
houses constructed
with 10 million houses
under in pipeline 23
Learnings from other countries:
Increase land supply
◆Dedicated Zoning to increase supply of
land for affordable housing (Vienna and
South Korea)
◆
Liberalize bye-laws for affordable hous-
ing units (South Korea and London)
◆
Plan areas at city outskirts to reduce
burden on city area (S korea)
Build Housing stock
◆City to provide land for affordable
housing projects (Vienna, S Korea and
London)
Access to capital and other
recommendations
◆Provide loans at low interest rates for
affordable housing projects (Vienna,
South Korea)
vis-à-vis the existing status in India
◆No dedicated zoning for affordable housing
◆
No existing framework for differentiated bye
laws for affordable housing
◆
Limited and low scale public / PPP projects
(E.g. Sanand in Gujarat)
◆
Shelter fund policy in specific states like Tamil
Nadu
◊ Demand side:
◆Interest subsidy under PMAY-U to buyer
◆
Housing credit classified under Priority
sector lending
◆Credit guarantee of upto INR 20 lacs loans
(Credit Risk Guarantee Fund Trust for Low
Income Housing)
◊ Supply side: No significant interventions
4.2 Overview of best practices
under PMAY-U: nationwide
case studies
In pursuance of the Government of India’s
vision of “Housing for All,” the Ministry of
Housing and Urban Affairs (MoHUA) has
been implementing the Pradhan Mantri
Awas Yojana – Urban (PMAY-U) since 25
June 2015. Under this flagship mission, the
Ministry provides central assistance to States
and Union Territories to address the housing
requirements of people belonging to the
EWS, LIG, and MIG categories through various
sub-schemes. Under the mission, about 122
lakh houses have been sanctioned, of which
more than 96 lakh have been completed and
delivered to beneficiaries across the country.
Building on the success of the scheme, the
Union Cabinet has approved the second phase
of the mission, targeting the construction of
1 crore additional houses for the urban poor
over the next five years.
Across India, States/UTs have implemented
a range of innovative and context-specific
strategies under the PMAY-U to strengthen
delivery of affordable housing. These initiatives
highlight the need efficacy, innovation,
inclusion, and convergence in meeting the
demand for housing. These interventions
have aimed at enhancing financial access,
accelerating construction, ensuring tenure
security and promoting sustainable urban
development. Some of these initiatives are
given below: 24
State
Best Practices
Adopted
Impact
Madhya
Pradesh
Model Tripartite
Agreement to integrate
EWS beneficiaries into
formal financial system.
The tripartite agreement among Banks/HFCs, ULBs and PMAY-U beneficiaries made ULBs guarantors
for EWS loans, achieving high occupancy and easing
financing, later replicated by other States.
Uttar
Pradesh
Advance Financial
Assistance for Faster
House Construction
To accelerate house construction under the BLC
vertical, the State Government provided ₹50,000
advance assistance post-sanction, boosting
confidence, speeding construction, and securing
top performance under PMAY-U.
Andhra
Pradesh
Special Drive to
Provide Housing Sites
Allotted housing sites and land pattas in women’s
names, adopted low-cost technologies, and offered
3% loans for beneficiary contributions.
Gujarat Affordable Housing
Zoning Reforms
Gujarat’s Town Planning (TP) Scheme is a land
pooling system that enables planned urban growth
by reorganizing private land for infrastructure and
amenities, then returning serviced plots to owners.
It supports equitable development and has been
key in reserving land for affordable housing and
slum redevelopment
Maharashtra
Policy Concessions
and Process Reforms
To overcome high land costs and regulatory hurdles
in affordable housing, Maharashtra introduced key
policy reforms under PMAY-U like providing Govt.
land at ₹1/sqm, higher FSI, and reduced stamp duty,
lowering costs and promoting private participation.
Rajasthan Policy reform
To promote affordable housing for EWS and LIG, the
Government offers 25% free land, fee exemptions,
and FAR up to 2.25 to developers at a government-
fixed sale price, thereby encouraging active private
sector participation in projects on government land.
Kerala
Multi-Faceted
Convergence and
Community-Based
Model
The LIFE Mission integrated housing with livelihood,
health, and skill support, empowering communities
through multi-sectoral convergence with PMAY-U.
This inclusive, multi-stakeholder model enhanced
coverage, community empowerment, and
sustainable urban development.
Tamil
Nadu
Promotion of Rental
Housing
Tamil Nadu has been leader in providing affordable
rental housing, especially industrial worker housing
and working women housing by converging efforts
of PMAY-Urban and State incentives including
innovative financing through TNIFMC. 25
Haryana
Incentivisation Policy
for Affordable Group
Housing Projects
The policy boosts affordable group housing through
clear norms and developer incentives, permitting
limited commercial use (up to 8%). Fee waivers,
EDC incentives, and transparent, government-
supervised allotment make it a strong model of
public–private collaboration ensuring affordability
and timely Q.
Various states have also adopted innovative
models for focusing on empowering women,
slum redevelopment etc. Some of these are
presented as below:
»
Tamil Nadu, Rajasthan, West Bengal,
Jharkhand, Karala and Odisha have lever-
aged self-help group (SHG) networks for
on-ground monitoring of PMAY-U proj
-
ects, where women’s groups supervise
construction quality, support geo-tag
-
ging, ensure timely instalment release, and
motivate beneficiaries to complete houses
promptly.
»
Andhra Pradesh, Tamil Nadu, Odisha and
Rajasthan have advanced housing ini -
tiatives for the urban poor. Tamil Nadu
has effectively implemented slum rede
-
velopment projects and provided land-
rights-based housing support for landless
families, while Rajasthan’s strategy of
granting land rights to landless beneficia-
ries has enabled vulnerable households to
build affordable homes and expand the
housing stock for the poorest sections.
»Under the PMAY-U, In-Situ Slum Redevel-
opment projects have been successfully
implemented by several States, including
Gujarat, Odisha, Tamil Nadu, Maharashtra
etc. to rehabilitate slum dwellers by pro-
viding decent, permanent housing with
essential amenities free of cost. These
projects have transformed informal set
-
tlements into well-serviced, livable com-
munities without displacing slum dwellers
from their original locations. While imple-
menting slum upgrading projects, States
have actively partnered with Civil Soci-
ety Organizations (CSOs) for community
mobilization, beneficiary identification
and participatory planning. This collab
-
orative approach has strengthened the
inclusiveness, transparency, and long-term
sustainability of the slum redevelopment
process.
In summary, global experiences show that
no single measure is enough; successful
affordable housing strategies combine land
availability, supply-side incentives, financing
support, and rental housing expansion.
Building on the lessons from international
experiences, addressing India’s affordable
housing challenge will require a mix of
structural reforms, targeted incentives,
and innovative financing mechanisms.
While global models cannot be replicated
wholesale, they offer valuable insights that
can be adapted to India’s unique urban
and socio-economic context. The following
section outlines a set of actionable steps to
bridge the affordability gap and create a
sustainable housing ecosystem.
The Committee is of view that the these
global and national best practices need to be
widely disseminated amongst states to help
them evolve policy initiatives . Policy reforms
are needed to crowd in private investments
and promote rental housing to meet future
shortage of affordable housing. 26
5.0 Recommendations
The global experiences underline the need for
having a multipronged approach to address
the demand for affordable housing, including
land reforms, supply-side incentives,
innovative financing and rental housing
frameworks. For India, the challenge is to
adapt these lessons to its urban realities and
build a model that is contextual and achieves
the balance between affordability and
ensuring financial viability for these projects.
While the PMAY has substantially reduced
India’s housing deficit, the program alone
cannot cater to the full range of affordable
and rental housing needs. Broader reforms
in land, finance, and tenancy are, therefore,
essential.
Following broad strategies are suggested
as critical pathways for shaping India’s
affordable housing agenda:
»
Increase land supply: Ensure ways to defray
cost of land for affordable housing projects
and improve supply of serviced land.
»
Housing stock supply: Enable investments
in affordable housing projects by
promoting PPPs, establish dedicated
funds, publish model project structuring
frameworks that address life cycle cost and
rental accommodation.
»
Access to capital: Address the need for
access to capital for both the developers
and buyers. Provide differentiated
financing, and usher in broader reforms
that incentivizes affordable housing,
including tax reforms with rationalized
municipal service charges.
»
Promoting Tenancy Reforms would
be crucial to promote rental housing
sector, reduce vacant houses in urban
areas and unlock these underutilized
assets. By making the rental market more
secure and attractive, tenancy reforms
would not only increase the availability
of affordable housing but also optimize
the use of existing urban infrastructure.
This approach reduces pressure on new
housing construction, curbs urban sprawl,
and supports more sustainable urban
development.
»
Other Reforms: Address the data gap in 27
this sector to promote evidence-based
planning for improved policies and
capacity building as well as monitoring
the progress.
5.1 Strategic interventions to
increase land supply
5.1.1 Zoning reforms and dedicated
zoning for affordable housing
Expanding the availability of land is one of
the most important initiatives that needs
to be taken to enable affordable housing at
scale. It is proposed to designate Affordable
Housing Zones within city Master Plans and
Town Planning Schemes, with a minimum
of 10% of all residential land earmarked
for this purpose. Such zoning provisions
would systematically nudge both Urban
Local Bodies (ULBs) and private real estate
developers to deliver dedicated affordable
housing projects, thereby ensuring land
supply does not become a structural barrier
to meeting demand.
This measure can be adopted by States
through future Master Plans , Town Planning
Schemes and Land Pooling Schemes,
especially in new development zones and
fast-growing Tier-II/III cities, where serviced
land is currently scarce
5.1.2 FAR relaxation & building
norms (ground coverage, setbacks &
parking)
Targeted reforms in building regulations can
allow higher density development and reduce
unnecessary cost burdens. It is recommended
that the permissible Floor Area Ratio (FAR)
may be increased from the prevailing 1.5–3
range to at least 5-6 for affordable housing
projects.
Complementary relaxations in development
norms can further facilitate project finance
making them more attractive and viable.
For example, capping parking requirements
at 10% for affordable housing, rationalizing
setback norms to 3-5 meters for high-rise
buildings (>18 m) and 0 - 2 meters for other
multi storied structures, rationalizing/
lowering ground coverage restrictions,
recalibrating density norms at zonal or city
level to reflect the unique requirements of
affordable housing projects are some of the
norms that need to be considered in this
regard.
Applicable through notification of FAR
and building norm relaxations in building
bye-laws by States and ULBs. It can also be
implemented through revisions in State
Unified Building Bye-laws and city level
Development Control Regulations. Relevant
for brownfield redevelopment and for
greenfield clusters earmarked for affordable
housing.
Vienna has long institutionalized land-
use regulations that mandate a significant
share of residential land for subsidized and
affordable housing, ensuring a continuous
pipeline of supply while keeping housing
costs stable.
South Korea similarly adopts a zoning-
based approach, acquiring and reserving a
proportion of developable land specifically
for public and affordable housing. These
practices demonstrate how integrating
affordability mandates within urban
planning frameworks can create predictable
land availability, incentivize developers, and
safeguard inclusivity in fast-growing urban
areas. 28
Many countries have rationalized building
bye-laws to enhance the attractiveness of
affordable housing projects for developed.
Singapore, Malaysia, Hong Kong, and
the Philippines have enabled large-scale
affordable housing supply by allowing higher
FAR for affordable housing. These countries
allow FARs above 8, while in South Korea,
the permitted FAR is set at 2.5 and can be
increased to 3 for projects that include
affordable housing units. For redevelopment
projects undertaken in partnership with
state authorities, the FAR allowance is further
raised to 5. In New York, FAR goes up to 15
and can reach 18 for projects that include
affordable housing units. Los Angeles also
allows FAR of 3-13 which increases by 30-
55% for 100% affordable housing projects.
Japan provides another notable example,
where flexible building codes have supported
compact, high-density, yet high-quality
housing development in dense urban areas.
These examples demonstrate how flexible
building norms and regulatory adaptability
can unlock land value, enhance housing
density, reduce project cost, and enable
large-scale delivery of affordable housing.
Multiple states in India like Gujarat, UP and
Maharashtra have removed ground coverage
requirements and allowed ~2sq.m. of parking
area per dwelling unit for affordable housing
units.
5.1.3 Expansion of planned urban
areas
Affordable housing at scale requires a
significant reduction in urban land costs,
which can only be achieved through an
expansion in the supply of serviced land.
Planned urban extensions, supported
by essential infrastructure and strong
connectivity, are critical to creating land
reserves dedicated to affordable housing.
By easing scarcity pressures, this approach
lowers entry barriers for both developers and
households.
To strengthen housing supply, it is
recommended that States prioritize the
acquisition and planned development of new
land, particularly on city outskirts and in peri-
urban areas. Such land can be strategically
designated as affordable housing zones,
equipped with trunk infrastructure, public
transport, and social amenities. This approach
prevents unplanned sprawl while enabling
large-scale, organized expansion.
Advanced monitoring tools, such as satellite
imagery and spatial analytics, should be
adopted to track land use changes, assess
growth patterns, and guide evidence-based
planning. Integrating housing, infrastructure,
and mobility in expansions beyond municipal
limits will allow States to manage urban
growth more effectively and mitigate the
risks of disorderly development.
In parallel, States should be encouraged to
leverage Public-Private Partnerships (PPPs)
to develop urban extensions. By integrating
housing with transport and basic services,
PPPs can accelerate the delivery of serviced
land, balance risks between public and private
stakeholders, and ensure that expansion
benefits both developers and low- to middle-
income households. Notably, Gujarat and
Maharashtra have pioneered Town Planning
Schemes that pool and service peri-urban
land, demonstrating how orderly expansion
can simultaneously provide infrastructure
and preserve affordability.
Through adoption of peri-urban land pooling
and Town Planning Schemes by States to
systematically extend serviced areas across
essential infrastructure and connectivity
nodes. Also, through leveraging underutilized
brownfield sites within city cores for
affordable housing. 29
Seoul, South Korea: During 1960s, many
illegal settlements were formed in Seoul due
to explosive population growth. Between
1989 and 1996, five major new towns with
the planned housing units ranging from
40,000 to 100,000 each just outside of
the Seoul’s greenbelt were constructed to
support balanced urban growth by creating
self-contained satellite cities with housing,
jobs, and infrastructure. Seoul coordinated
the large-scale planning and massive
mobilization of public and private resources.
The plan also contained transportation
networks, including roads and subway
extensions, parks, regional heating system,
and other urban public infrastructure.
Recommendation: The acquisition of new
land and planning to improve affordable
housing stock, availability of public transport
and social amenities would improve the
affordability and quality of housing stock.
To ensure sustainable growth, it is also
recommended that States must actively
monitor Land Consumption Rate to
Population Growth Rate (LCRPGR).
5.1.4 Transit-oriented development
(TOD) and precinct development
Affordable housing can be more effectively
integrated with city infrastructure by
embedding it within Transit Oriented
Development frameworks. It is recommended
that cities should earmark areas near metro
and mass transit stations exclusively for
mixed-use development, combining offices,
commercial spaces, and affordable housing.
This approach would simultaneously expand
the housing stock and improve access to jobs
and services, reducing commuting costs for
low-income households. These can form ToD
precincts in which more relaxed and lighter
byelaws may apply to promote growth.
Within these TOD precincts, affordable
housing projects should be permitted with
an FAR of up to 8, along with exemption
from parking requirements to lower costs
and optimize land use. Density norms may
be revised upwards to around 1,000 units/
hectare, ensuring compact yet liveable
environments. By enabling higher FAR with
dedicated density thresholds, TOD based
affordable housing also disincentivize
gentrification, while making efficient use of
urban land close to transit nodes.
Value Capture Financing (VCF) mechanisms
should also be institutionalized so that
the rise in land and property values due to
infrastructure projects (like metros, highways,
and ring roads) can be harnessed to fund
both infrastructure and affordable housing.
In India, several TOD policies have already
been introduced but remain inconsistently
implemented. For instance, in Mumbai,
the Development Control and Promotion
Regulations (DCPR) 2034 designates TOD
zones within 500 metres of metro and
monorail stations. Similarly, in Delhi, TOD
zones are defined as a 2 km corridor with
a 300-metre influence area on either side
of metro lines. While density norms have
been specified (up to 800 dwelling units
per hectare) and minimum housing unit
allocations mandated clear FAR benchmarks
are absent. It has gained limited traction
due to lack of private sector participation.
However, pilot projects, such as the one at
Karkardooma, Delhi remain incomplete
even after 14 years due to an overreliance on
government led development rather than
unlocking potential through zoning reforms
and FAR relaxation for private developers.
For TOD to realize its transformative role in
affordable housing, States need to establish
clear FAR benchmarks, priority for affordable
housing within these precincts, and 30
streamlined approvals. Coordinated planning
among state urban bodies, transport bodies,
development authorities and other line
departments is equally critical.
Curitiba in Brazil provides a strong example
of TOD implementation. The city defined
TOD zones along its major transport corridors
and adjoining lanes, permitting FAR of 4 (as
against FAR of 1 in other adjoining areas),
extendable to 6 around structural axes using
Transferable Development Rights (TDRs).
This model enabled compact, high-density
development aligned with public transit,
reducing urban sprawl and ensuring that
affordable housing was built near job hubs
and services. California has removed parking
requirements near major transit stations and
allows 100-120% density bonus and 40-55%
FAR bonus. Dwelling units / hectare vary from
250-950 in Los Angeles, 1000+ in Hong Kong
and ~1,500-2500 in New York.
For cities with operational or planned
metro and rapid transit systems. TOD-linked
affordable housing can be advanced through
greenfield corridors as well as brownfield
precinct redevelopment within 500 m
influence zones around existing transport
nodes.
5.1.5 Transferable development
rights (TDR)
To improve the viability of affordable housing
projects, developers need to be permitted to
sell unused TDRs, provided the corresponding
FAR is not utilized on the original land
parcel for a minimum period of 50 years.
Furthermore, all TDR restrictions should
be made publicly available through online
registries to improve transparency for buyers
and investors.
At present, most states restrict TDR usage to
land acquired for public purposes, limiting its
utility in unlocking land supply. The scope of
TDR should be expanded to cover not only
land surrendered to the government but
also land retained by owners with limited or
partial development potential. This would
provide flexibility in land markets, channel
development rights to high-demand areas,
and reduce project costs for affordable
housing.
In Maharashtra, TDR is permitted for land
acquired for public purposes, heritage
conservation, and slum rehabilitation.
Typically, 2–3 times TDR is granted, with
Development Rights Certificates issued only
when land is surrendered free of cost to the
authorities. TDR loading is allowed in the
range of 30–70% (equivalent to 0.5–1.5 FAR). In
Telangana, provisions allow the construction
of one additional floor without requiring
changes to setback norms, reflecting a
more flexible approach. However, across
most states, usage remains limited and
fragmented.
Expanding coverage of TDR can unlock
under-utilized land parcels and make
affordable housing financially sustainable.
Development rights currently restricted in
airport zones, forest areas, and heritage sites
should also be made usable through TDR for
procurement of affordable housing project, in
addition to land acquired for public purposes.
Such rights should be transferable both for
land surrendered to authorities and for
land retained by owners, thereby creating a
secondary market in development rights that
improves liquidity and efficiency.
Expansion of TDR frameworks beyond
public purpose land to include brownfield 31
Globally, several best practices present
interesting insights in this regard as indicated
below
◆
Seattle: The city permits TDR generated
by affordable housing projects to be sold,
creating a transparent market mechanism
that channels value directly back to low-
cost housing initiatives.
◆
New York: A structured TDR framework
defines sending and receiving sites, with
prices determined by market forces.
Transfers are capped at 20% of the receiv-
ing unit’s FAR, ensuring balanced growth
while enabling land value capture.
◆São Paulo (Brazil): Deployed TDR for heri-
tage conservation and affordable housing
by creating a transparent, tradable market
for development rights.
redevelopment areas, with transparent
registries that can be adopted across
metropolitan regions and emerging urban
centres to improve land market liquidity.
5.1.6 Creating land banks
Creation of land banks can provide a steady
pipeline of land for Affordable Housing
projects and associated infrastructure
through creative redevelopment. Government
may explore the possibility of mapping and
aggregating vacant or underutilised land
under various ministries, departments and
Central/State Public Sector Undertakings
(PSUs), and bring them into land banks. Land
parcels from such banks may be leased to
public/private agencies for 30-50 years lease,
without possibility of renewal, enabling them
to undertake the construction of affordable
housing (particularly rental housing) and
associated infrastructure creation. This
inventory should be digitally accessible to
enable transparent planning and allocation.
The inventory should not only list the vacant
land parcels in the Residential zones /
affordable housing zones but also list the
vacant and underutilized land held by
government departments and PSUs, such as
the Railways, Airport Authority of India, and
Defence.
»
The Indian Railways alone holds ~460 sq.
km of vacant land, constituting nearly 10%
of its total landholding.
»Defence authorities hold ~182 square km
of vacant land.
Through this model, the land ownership shall
remain with the concerned department/
public bodies, PSU or other land-owning
agencies, while unlocking land value for
public good. After expiry of lease period land
will again be available for redevelopment to
land owning agencies. This model can remove
land from equation and foster housing and
public infrastructure development which is
devoid of speculative investment.
Within India, Kerala has developed a
state-level land bank, though primarily
focused on industrial use, while Jharkhand
has mapped 2.1 million acres of land for
infrastructure and industrial purposes. A
notable housing-specific example is the
Dharavi Redevelopment Project in Mumbai,
where 47.5 acres of railway land in Mahim
were leased for 30 years to deliver over 10,000
housing units for railway staff, slum dwellers,
and local residents. 32
Internationally, Vienna has established a
land bank of 3 million sq. m by repurposing
underutilized rail corridors, empty hospitals,
and surplus public property for affordable
housing. In Seoul, South Korea, has
converted military-owned golf course into
sites for 10,000 apartments. Further, the
Korea Land and Housing Corporation (LH)
develops peri-urban areas into planned new
towns, integrating affordable housing with
infrastructure from the outset.
In Singapore, the Housing and Development
Board (HDB) acquires and banks land
centrally, releasing it systematically for
public housing projects. This approach has
enabled over 80% of the population to access
affordable homes.
In Cleveland, USA, municipal land banks
reclaim tax-delinquent or abandoned parcels
and repurpose them for affordable housing
and community development.
5.2 Increase supply of
affordable housing stocks
5.2.1 Rental housing for industrial
workers
Ensuring access to affordable rental housing
for industrial and informal sector workers
is critical to strengthen urban economies
and avoiding the proliferation of informal
settlements. Worker housing on rental basis
should be developed in close proximity to
industrial hubs, manufacturing clusters, and
logistics corridors to reduce commuting time
and costs, while improving productivity and
quality of life.
The Ministry of Housing and Urban Affairs
(MoHUA) has already laid out industrial and
employee housing models (under Affordable
rental housing models and SAFE housing
model), which states and urban local bodies
can adapt to local contexts. These models
emphasise public-private partnerships,
integration of worker housing into industrial
development plans, and leveraging incentives
such as higher FAR and reduced approval
timelines for projects that include worker
accommodation.
Integrating worker housing into a broader
slum avoidance and formalization strategy is
equally important. By proactively providing
formal, serviced housing near employment
centres, cities can reduce the pressure on
informal settlements and ensure workers have
access to basic services such as sanitation,
clean water, and transit connectivity. This
approach also contributes to urban resilience
by preventing the creation of unplanned
settlements that are difficult and costly to
upgrade later.
5.2.2 Reservation for EWS/LIG
housing in all real estate projects
and creation of state shelter fund
To ensure a steady supply of affordable
housing in rapidly growing urban areas, there
should be a mandatory reservation of 10-15%
of the built-up area for EWS/LIG housing in
all housing & commercial projects exceeding
10,000 sqm built-up area or 5,000 sqm
plot area. This mandate would significantly
expand the availability of housing stock under
the affordable category while ensuring that
such units are integrated within mainstream
urban development.
In cases where the builder is unable to
construct the reserved units within the same
project site due to any justified reasons,
provision may be made for construction of the
reserved housing units within a 4-kilometer
radius from the original project site thereby
maintaining accessibility to urban services
and employment opportunities. Additionally,
flexibility may be provided for developers to
partner with specialized agencies or third-
party developers for constructing the same
reserved units on their behalf. 33
If none of the above options are not feasible,
developers should be required to contribute
to a dedicated Shelter Fund roughly twice
the prevailing cost of construction, in order
to account for the project’s land value. The
option to contribute to shelter fund should
be seamless/automatic and not subject to
validation by authorities on possibility of
creating EWS/LIG units
However, for the projects beyond 1,000
sqm of built-up area, developers should be
mandated to contribute to the Shelter Fund.
Such contributions must be transparently
assessed and periodically revised to reflect
prevailing construction costs, thereby
ensuring adequate and sustainable financing
for affordable housing initiatives.
The dedicated fund can also be strengthened
by collecting 1.1-3% of registration value from
residential and commercial units. States may
additionally allow the sale and purchase
of the credits of the said fund, creating a
market for financing affordable housing. The
fund should be utilized as a capital grant
for affordable housing, with the percentage
allocation to be determined on a case-to-case
basis by the fund manager.
Such a multi-pronged mechanism would
ensure that compliance is practical for
developers, while also guaranteeing a cross
subsidization of affordable housing. It will also
ensure continuous flow of resources, either
in the form of new housing stocks or corpus
funds for the affordable housing. Some
examples of the policy broadly exist in Tamil
Nadu, Maharashtra, Telangana, Rajasthan
and West Bengal. The provisions need to be
strengthened, aligned with other reforms
and rates should be rationalised to promote
creation of additional stock. Further, similar
policies need to be adopted by other States.
Tamil Nadu has pioneered in this regard
by having reservations for EWS Housing
and setting up a dedicated fund called the
Tamil Nadu Shelter Fund. Tier-I fund is a
government regulated fund which receives
funds from the various sources like levy of
fees such as shelter charges (1-3% of guideline
value) and other collections approved by the
Government. A substantial portion of the fund
is used to finance the housing projects by the
Government including the grant component
of State Housing Schemes/ state government
share in the Centrally Sponsored Housing
Schemes.
5.2.3 Policy for creation of a
dedicated fund for affordable rental
housing
In continuation of earlier recommendations,
it is proposed to establish a dedicated fund
to provide long-term financing for affordable
rental housing, thereby reducing reliance
on direct subsidies. This may be achieved in
following manner:
»
Institutions such as the National Housing
Bank (NHB) and Housing and Urban
Development Corporation (HUDCO) may
be engaged, with access to low-cost capital
sourced through tax-free bonds or Priority
Sector Lending (PSL) shortfalls.
»
Enabling External Commercial Borrowings
(ECBs) and granting relief from the
Minimum Alternate Tax (MAT), payable
under Section 115JB of the Income Tax Act,
to support the development of particularly
affordable rental housing.
This dedicated fund may be deployed towards
Shelter Fund (Tier-1) in Tamil Nadu 34
investments in rental housing, including
industrial worker accommodation, hostels
for working women, and similar projects.
To ensure professional management,
transparency, and accountability, the
investment committees should comprise a
majority of representatives from the private
sector. The fund should be managed in a
professional manner and designed to offer a
comprehensive suite of financing instruments
for affordable housing projects, including
equity finance, mezzanine finance, debt, and
subordinate debt.
Not everyone in a city needs to own a house,
nor is ownership always the most practical
or desirable solution. Urban populations
are highly mobile, with large segments
comprising migrants, students, industrial
workers, and low-income households who
often require flexibility and mobility rather
than permanent ownership. A balanced
housing ecosystem must therefore provide
both ownership and rental options, ensuring
that people can choose according to their
income levels, life stage, and mobility needs.
For this to work, rental housing must be
supported through clear legal frameworks
that safeguard both tenants and landlords,
while home ownership must be made more
accessible through affordable and inclusive
housing finance options. Building such
an ecosystem would reduce pressure on
ownership-based schemes, make cities more
inclusive, and respond more effectively to the
diversity of housing demand.
Acknowledging the importance of
requirements of rental housing, the Ministry
of Housing and Urban Affairs shared the
Model Tenancy Act (MTA) 2021 with States/
UTs for adoption by either legislating new law
or amend the existing rental laws on lines of
5.2.4 Reforms in rental housing legal framework
Shelter Funds (Tier- 2) in Tamil Nadu
◆Tier-II fund is registered with SEBI as Social
Alternative Investment Fund and is man-
aged by Tamil Nadu Infrastructure Fund
Management Corporation Limited
◆
Gov. of TN is an anchor investor. This money
is used to mobilise institutional and private
capital from other sources such as ADB
and World Bank to fund affordable hous-
ing projects such as ownership, rental,
co-living, student/senior housing, women’s
hostel.
◆
The fund is managed professionally by
Investment Committee (IC) comprising of
industry experts. IC approves the invest-
ment/exit proposals submitted by the
Investment Team.
◆
Current portfolio includes Tamil Nadu
Working Women’s Hostels Corporation
Limited. Tamil Nadu Industrial Housing
Private Limited, Ambur Properties Private
Limited. Kaivalyam Eco-Life Private Lim-
ited etc.
◆
Tier-II fund has added approximately
16000 rental beds, and 6000 affordable
housing units are under development
◆
Six private projects and eight public-pri-
vate partnership projects with a combined
project cost of $130 million are in pipe-
line. Of this, $67 million was invested by
TNSF. Focusing on industrial and afford
-
able housing across cities such as Coim-
batore, Chennai, Madurai, and Hosur, 47%
of the investments were directed towards
Tier I cities and 38% towards Tier II cities,
demonstrating a balanced approach to
urban development. 35
MTA that aims to promote rental housing
by balancing and protecting the rights and
interests of both the tenants and landlords
by regulating renting of premises in an
efficient and transparent manner. It will also
help in overhauling the legal framework with
respect to rental markets across the country
by providing speedier dispute resolution
mechanism framework and is expected to
give a fillip to private participation in rental
housing. Time bound and robust grievance
redressal mechanism comprising of Rent
Authority, Rent Court and Rent Tribunal to
provide fast-track resolution of disputes. MTA
seeks to provide the confidence to landlords
to rent out vacant premises with no fear of
not getting the premises back post tenancy
period and thus it will help in unlocking the
potential vacant stock. MTA will promote
vibrant, sustainable, inclusive & formal rental
market and also help in utilizing the potential
economic opportunities in rental segment.
States of Andhra Pradesh, Tamil Nadu, Uttar
Pradesh, Uttarakhand, Assam, Arunachal
Pradesh and UTs of Jammu & Kashmir,
Andaman & Nicobar Islands, Dadra & Nagar
Haveli and Daman & Diu and Lakshadweep
have enacted their State rental laws on lines
of MTA.
Reforming India’s rental housing framework
is, therefore, key to addressing urban
housing shortages and unlocking over 1
crore vacant homes. Modern rental laws
and implementation of the Model Tenancy
Act can build trust between landlords and
tenants, a reform which has to be introduced
to mobilise the rental markets. Further, to
support the mobile but financially stable
population, institutional models, like in
Singapore or the Netherlands, can be
introduced, where companies or not-for-
profits invest in rental housing.
To scale up affordable rental housing, States
should adopt dedicated rental housing
stock policies through Public–Private
Partnership (PPP) models, in lines PMAY-U
2.0 Affordable Rental Housing (ARH) vertical.
Under this approach, private sector may bid
for government-owned or acquired land,
construct affordable rental housing, and rent
it out while ensuring long-term maintenance.
Alternative models like BOOT, DBOFT, annuity,
hybrid etc. could be considered depending
on the context on a case-to-case basis.
In addition, private developers could be
incentivized to acquire land parcels and
build rental affordable houses for the poorest
sections of the society. Viability gap funding
has been explored as a potential option to
make it financially attractive for developers
to invest in affordable housing projects
Given substantial sunk funds in such projects,
the developers could be further incentivized
by offering long-term loans (say 20-40 years)
through development financing institutions
like NaBFID, NHB, HUDCO.
Several countries, including Austria and South
Korea, provide subsidised rental housing as
a critical component of their housing policy.
For example, in Vienna, Austria, net rents
are capped by law at €4.97 per sq. m, with
land prices limited to €188 per sq. m. Private
rental market rates, however, reach as high
as €7.5 per sq. m (excluding running costs),
creating an effective discount of 30–40%
in social housing. France provides 50 year
loans for affordable housing projects. Prêt
Locatif à Usage Social (PLUS) is a loan with
a maximum term of 40 years (or 50 years for
land purchases) with subsidy of 5-22% of cost.
Dwellings are subject to maximum rent levels
that differ between regions. These loans are
made available through deposits in Livret
personal savings Accounts (Special tax-free,
high interest rate, state guaranteed accounts).
This scheme has funded Euro 10 billion in
2019 for affordable housing
Way Ahead: Reforming Rental housing Ecosystem on lines of Model Tenancy Act and evolving
National Urban Rental Housing Policy. 36
5.2.5 Rationalization of municipal
service charges for affordable rental
housing provided by institutions/
companies
In many States, companies/institutions that
provide affordable housing units under
rentals are considered as commercial units
with higher municipal service charges like
electricity, water and property taxes payable
on such properties. On the other hand, any
rental housing maintained and operated by
individual owners face residential rates of
such charges. Similarly, rental agreements
made by companies face GST while properties
rented out by individuals do not face GST. This
has restricted the growth of such formal rental
affordable housing operated/maintained
by companies / institutions / developers,
wherein investments in lifecycle costs can
be contributed by a developer instead of
individual households.
In addition, individual tenements under
company-owned rental units, when operated
as paying guest (PG) accommodations,
co-living facilities, or service apartments,
are currently not treated as residential
tenements. At present, such units are often
billed at commercial utility tariffs for water,
electricity, and waste disposal, which raises
the cost burden on tenants and operators. To
encourage private participation in Affordable
Housing segment, such projects which are
falling under the category of Affordable
Housing should be treated as residential and
charged at residential tariff rates. Companies
such as OYO Life, Stanza Living, Zolostays,
and NestAway demonstrate the growing
scale of such co-living and managed rental
housing models in India. Extending rental
income incentives alongside residential
utility charges will help attract market driven
solutions while supporting a vibrant, inclusive,
and sustainable rental housing market for
Affordable Housing.
Affordable Rental housing units should be
considered as residential activity for the
purpose of levying of municipal charges and
GST irrespective of the fact who is operating.
It is the final use of such units that should
determine the taxes, fees and charges and
not the operator.
5.3 Access to capital
Affordable housing remains constrained not
only by the high cost of land and low supply
of units, but also by systemic weaknesses in
the financing ecosystem. Both households
and developers face barriers that make
affordable housing a high-risk, low-return
segment. To address these gaps, the following
interventions are recommended:
5.3.1 Incentivize affordable housing
projects by restoring section 80-IBA
To boost the affordable housing segment, it
is recommended to reintroduce provisions
under Section 80-IBA of the Income Tax
Act, which earlier allowed 100% income tax
exemption on profits and gains derived by
developers from the operation of approved
affordable housing projects (applicable from
June 2016 to March 2022). The revival of this
incentive will provide a strong fiscal push to
developers, improving project viability and
encouraging greater participation from the
private sector.
5.3.2 Tax incentives for affordable
housing REITs
A Real Estate Investment Trust (REIT) is a
company or trust that owns, operates, or
finances income-generating real estate. To
encourage affordable housing units to raise
funds through REIT and reduce the cost
of funds for affordable housing units, it is
proposed that rental and capital gain income
for investors from REITs whose underlying
assets are affordable housing projects should
be exempted from tax. Together, these
interventions can drive inclusive and market-
responsive housing growth. 37
5.3.3 Enhanced credit guarantee for
buyers
Many buyers of affordable housing units
are EWS and LIG individuals who often face
issues with access to formal credit from banks
due to low income and lack of education on
formal financing. Credit Risk Guarantee Fund
Scheme for Low Income Housing (CRGFTLIH)
provides guarantee cover for loans upto ₹ 20
lakhs. However, these guarantee cover should
be increased to ₹ 40 lakhs to sufficiently cover
sale of affordable housing units.
5.3.4 Lower interest rate through
tax free bonds
Capital cost is a major contributor to the
construction cost. Real estate developers face
high interest rates to the tune of 12-15% due to
perceived high risk involved in such projects.
Moreover, the affordable housing finance
sector still faces issues in availing finance
under Priority Sector Lending.
It is proposed that National Housing Bank
(NHB) should be allowed to issue tax free
bonds under Section 54EC of Income Tax
Act. The proceeds of these units should be
used for providing concessional funding
for Affordable Housing projects that build
affordable housing dwelling units targeted
at the EWS/LIG category of buyers.
5.3.5 Land use charge exemption
Different kinds of land use zoning in urban
areas restrict the usage of land for residential
areas. Moreover, the available land often
gets priority for luxury and middle-income
housing units over EWS and LIG segments.
Land use changes from agriculture or other
uses to residential uses require charges to
be paid to State authorities. This restricts the
conversion of available land into affordable
housing units.
Charges for change of land use should be
exempted with the condition that only
affordable housing units can be constructed
on such land, while utilizing at least 50% of
the permissible FAR.
To address this, Maharashtra and Haryana
have introduced their Affordable Housing
Policies under PMAY-U scheme, offering
land at concessional rates, fee exemptions,
and higher FAR/FSI for affordable projects
on government or converted land. Other
States should also adopt similar measures
to make land more accessible for affordable
housing and encourage greater private sector
participation.
5.3.6 Stamp duty and registration
charge exemption
Stamp duty and registration charges can
amount to 5-7% of the transaction cost of
the house. However, this makes the existing
houses unaffordable for low-income
categories.
Stamp duty and registration charges should
be exempted for all PMAY-U 2.0 houses
and other dwelling units which are part
of ‘Affordable Housing Projects’. This will
meaningfully reduce the price of lowest end
of affordable housing and make ‘Affordable
Housing’ more accessible to buyers and
attractive to builders.
Several States including Gujarat, Maharashtra,
Jharkhand, Madhya Pradesh, Uttar Pradesh,
Telangana etc have also eased the financial
burden on beneficiaries by reducing stamp
duty and registration charges for EWS
housing under PMAY-U, often charging only
a token amount between ₹1 and ₹1,000 for
houses up to 60 sq. m. This measure has
significantly improved affordability and
should be adopted widely across the country.
5.4 Other recommendations
Beyond the above reforms and
recommendations, the report underscores
the need for complementary measures
that strengthen the overall ecosystem for
affordable housing in India. These measures
aim to create an enabling environment by
addressing institutional capacities, improving
underwriting practice, and leveraging
technology to support large-scale delivery of NITI Aayog 38
housing for all.
5.4.1 Promoting ease of doing
business
To improve the supply of housing, a time
bound, and Single Window Clearance System
is essential for ensuring faster approvals of
projects by developers. At present, housing
projects are delayed due to the requirement
of multiple clearances from different
departments, leading to cost escalation
and reduced investor confidence. A single
window mechanism, preferably digital,
can integrate approvals related to land use,
environment, safety, and infrastructure
services, while setting strict timelines for
decision-making. This would not only reduce
bureaucratic delays and transaction costs
but also enhance transparency, improve
ease of doing business, and accelerate the
delivery of affordable housing projects,
thereby increasing overall supply. There is
also need to focus on streamlining processes,
improving transparency, and enabling faster,
accountable decision-making
5.4.2 Evidence-based planning -
tackling the data gap
A National Housing Data Grid should be
established to consolidate information
on stock, supply, rentals, and vacancy
rates, creating a reliable evidence base for
affordable housing planning. By leveraging
technologies such as AI, blockchain, and
geospatial analytics, this grid can function
as a decision-support system for land
reforms, demand-supply monitoring, and
evidence-based interventions. To strengthen
its foundation, the RERA Act should be
expanded to mandate systematic collection
and maintenance of housing data across
States. Building on this infrastructure, a digital
marketplace for affordable housing can be
developed, enabling transparent listing of
verified projects and improving access for low-
income households, while also streamlining
government subsidies and rental vouchers.
5.4.3 Capacity building
The Committee recommends that the
Ministry of Housing and Urban Affairs
(MoHUA) develop a Model Housing Policy to
serve as a guiding framework for states. The
policy should be designed with flexibility,
enabling states to adapt and adopt it in
line with their local contexts while ensuring
alignment with national priorities on
affordable housing. In parallel, MoHUA
should facilitate the systematic sharing of
best practices from states such as Haryana
and Maharashtra, where urban planning
reforms and affordable housing initiatives
have demonstrated tangible impact. Wider
dissemination of such models would not only
accelerate policy adoption but also reduce
fragmentation and enable more consistent,
effective implementation across the country.
5.4.4 Innovative underwriting
practice
A tailored credit product which has been
developed under the aegis of Indian Banks
Association (IBA) should be popularized for
the Economically Weaker Sections (EWS)
and Low-Income Groups (LIG), where access
to institutional finance remains weak. Cash
flow-based underwriting templates, suited to
informal income streams such as daily wages
or self-employment, can expand housing
finance access, reduce reliance on informal
lenders, and enhance creditworthiness for
vulnerable households. Also, design and
implementation of the alternate credit
information models, similar to Gramin Credit
Score announced in the Union Budget
2025-26, will help the lenders in better risk
assessment and enable the financing needs
in Affordable Housing sector.
5.4.5 Provision for O&M support
In order to address the issues relating to O&M,
it is recommended that in all Affordable
Housing projects, mixed-use development
be adopted, wherein the ground floor
(+1) is allowed for commercial use and
the upper floors for affordable housing.
Recommendation for higher FAR, as outlined
in the previous section 5.1.2, can also be APPROACH PAPER ON AFFORDABLE HOUSING 39
leveraged to enhance the financial viability
of such projects. Rental income generated
from the commercial spaces can then be
channelled towards the upkeep of housing
assets, thereby ensuring proper lifecycle
maintenance.
There are various States that have taken such
initiatives under PMAY-U. The Government
of Telangana has developed several multi-
storeyed housing projects that integrate
commercial spaces such as shopping
complexes/retail shops on the ground floor
of residential blocks in Hyderabad. These
commercial units are designed to generate
revenue, either through monthly rentals or
one-time sales, to create a maintenance
corpus for the housing colonies. The funds are
utilized to cover Operation and Maintenance
(O&M) expenses, including lift operations,
common area lighting, water supply pump
sets, and Sewerage Treatment Plants (STPs).
To ensure sustainability, Resident Welfare
Associations (RWAs) have been formed to
manage rent collection and oversee the
overall O&M activities of these housing
project.
Similar initiatives have been taken up by
the States of Madhya Pradesh, Maharashtra,
Gujarat amongst others.
Summary of Recommendations and Implementing Responsibilities
The following table summarises the recommendations of the Committee along with
the proposed instruments for operationalisation and the agencies responsible for their
implementation.
S.No. Recommendation
Instrument for
Operationalisation
Responsibility for
Action
1. Strategic interventions to increase land supply
1.1
Reserve ≥10%
residential land for
Affordable Housing in
Master Plans/TPS.
Inclusion in Master Plans
and URDPFI Guidelines.
MoHUA to include
provision in URDPFI
Guidelines; State
Governments to adopt.
1.2
Raise FAR to 5-6 and
ease parking/setback/
density norms for
affordable projects.
Update Model Building
Bye-laws and National
Building Code (NBC).
MoHUA/BIS to revise;
States/ULBs to adopt.
1.3(a)
Adopt land pooling
and PPP for peri-
urban growth with
spatial monitoring
tools.
Inclusion in URDPFI
Guidelines and adoption
by States.
MoHUA to include
provision in URDPFI
Guidelines; State
Government to adopt
(b)
Expand planner
urban areas through
monitoring LCRPGR
URDPFI metrics and State
GIS systems.
MoHUA to issue
guidance; States/UDAs
to monitor/report. 40
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
1.4
Reserve mixed-use
TOD precincts near
mass transit with
higher FAR (up to ~8),
relaxed parking, and
density norms.
Update TOD Policy,
Development Control
Regulations, and Building
Bye-laws.
MoHUA to update TOD
Policy and URDPFI
Guidelines; State
Governments/ULBs to
adopt.
1.5
Provision to allow
TDR from affordable
housing to be sold to
make them financially
viable
Update Value Capture
Policy and Model Building
Bye-laws.
MoHUA to revise Value
Capture Policy; State
Governments/ULBs to
adopt.
1.6
Digitally map all
vacant public & private
land; prioritise EWS/
LIG housing and tax
idle plots.
Inclusion in URDPFI
Guidelines; creation of
State-level land-banks
and fiscal disincentive
framework.
MoHUA to prepare
guiding framework; State
Governments/ Urban
Development Authorities
to implement.
2. Increase supply of affordable housing stocks
2.1
Develop rental units
near job hubs using
MoHUA models that
emphasise PPPs
and integration with
industrial plans.
Adopt MoHUA model
frameworks; include in
State Affordable Housing
Policies and industrial
area regulations.
MoHUA to review and
update policy; State
Governments/ULBs to
implement.
2.2
Mandate 10–15% EWS/
LIG housing in projects
exceeding 10,000 sqm
BUA or 5,000 sqm plot
area; where on-site
construction is not
feasible, permit off-
site delivery within 4
km, for projects >1,000
sqm to contribute to
Shelter Fund (~2× cost)
funded by 1.1–3% levy
and tradable credits.
Update Model Building
Bye-laws; notify new
Affordable Housing Policy.
MoHUA to prepare
guiding provisions; State
Governments to adopt
best practices 41
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
2.3
Create NHB/HUDCO-
anchored fund using
tax-free bonds, PSL
shortfalls and ECBs for
rental projects.
Establish fund vehicle(s);
enable tax/ECB provisions;
MoHUA/ DFS/NHB/
HUDCO to design; Dept.
of Revenue to amend
relevant Acts; States
Governments to notify.
2.4
Promote diverse rental
housing models and
rental reforms
Review and update
National Urban Rental
Housing Policy and Model
Tenancy Act.
MoHUA to examine and
update the National Urban
Rental Housing Policy
(2015)
MoHUA to review changes,
if any required in the Model
Tenancy Act.
States to adopt and
implement
2,5
Treat affordable rental
as residential use for
utilities, property tax
and GST
Revision of GST and
municipal tariff rules.
MoHUA to initiate; GST
Council and States to
implement.
3. Access to capital
3.1
Reintroduce 100%
profit exemption for
affordable housing
projects
Amendment to Income
Tax Act.
Department of Revenue.
3.2
Exempt rental and
capital gains income
for Affordable Housing
REITs.
Amendment to Income
Tax Act.
Department of Revenue.
3.3
Raise CRGFTLIH limit
from ₹20 lakh to ₹40
lakh for EWS/LIG
buyers.
Revision of CRGFTLIH
scheme.
MoHUA and NCGTC 42
4.1
Implement digital
time-bound
clearances for housing
projects.
Integration of clearance
systems and procedural
reforms.
MoHUA to coordinate
with States.
4.2
Create digital
database of stock,
supply, and vacancy
linked to RERA.
Amend RERA rules for data
and creation of National
Housing Data Grid.
MoHUA
4.3
Develop a Model
Housing Policy and
disseminate best
practices amongst states
Preparation and circulation
of Model Policy.
MoHUA.
4.4
Adopt IBA cash-
flow templates and
alternate credit scores
for informal incomes.
Collaboration with the
Indian Banks Association
and DFS.
DFS and MoHUA.
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
3.4
Allow NHB to issue
54EC tax-free bonds
for affordable housing
finance.
Section 54EC of Income
Tax Act; bond issuance by
NHB.
DFS to propose;
Department of Economic
Affairs to approve.
3.5
Land use charge
exemption for projects
having affordable
housing units
constructed on at least
50% of permissible FAR
Revision of municipal and
state charges
MoHUA to issue guidance;
State Governments to
adopt.
3.6
Exempt stamp duty
for PMAY-U 2.0 and
other affordable units
MoHUA guidelines and
State adoption.
MoHUA to guide; State
Governments to adopt.
4. Other recommendations 43
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
4.5
Allow commercial
use (G+1) in affordable
housing projects to
fund maintenance.
Inclusion in Affordable
Housing Policy and Building
Bye-laws.
MoHUA.
5. Nudging the states
5.1
Reform linked
financial incentives.
Linking funding
not just to housing
outcomes, but also
to allocations under
flagship urban
schemes and Finance
Commission transfers.
Central financial support
linked to state level reform.
MoHUA and Department
of Economic Affairs NITI Aayog 44
To nudge states towards adopting various
reforms, the Committee recommends the
following reform-linked financial incentives
under various Urban Missions of MoHUA like
PMAY-Urban 2.0, Atal Mission for Rejuvenation
and Urban Transformation (AMRUT), Urban
Transport (Operationlising Metro Network),
PM e-Bus Sewa Scheme etc.
»
Incentives tied to reforms: Central
financial support should be directly linked
to state-level policy changes that promote
affordable housing.
»
Conditional disbursement: Release
of funds should be contingent upon
notification and implementation of key
policy reforms, ensuring accountability
and progress.
»
Comprehensive funding coverage:
Reform-linked incentives should extend
beyond housing to include allocations for
metro projects, MoHUA flagship schemes,
and Finance Commission transfers, thereby
creating a holistic funding ecosystem.
Beyond these specific programmatic
incentives, the Committee further
recommends establishing strong reform
linkages across all future schemes and
funding mechanisms, both direct and
indirect, that influence affordable housing
outcomes. This integrated approach will
ensure policy coherence, enhance fiscal
accountability, and create a sustained
ecosystem that incentivizes states to prioritize
and mainstream affordable housing within
the broader urban development agenda.
6. Nudging states through Reform-linked financial
incentives APPROACH PAPER ON AFFORDABLE HOUSING 45
7. Conclusion
Affordable housing in India stands at
the critical intersection of social welfare,
economic growth, and urban sustainability.
Despite significant policy momentum under
the Housing for All vision and efforts through
PMAY-U and PMAY-U2.0, the persistent
shortage of Affordable housing, particularly
EWS housing in urban areas underscores
the depth of the challenge. High land costs,
shrinking supply, weak rental frameworks,
and limited access to finance have combined
to widen the affordability gap, leaving
large sections of low- and middle-income
households excluded. Global lessons from
Singapore, Vienna, and Seoul show that large-
scale public housing, land-use reforms, and
innovative financing can create sustainable
housing ecosystems that balance affordability
with viability.
This report highlights that bridging India’s
affordability gap requires moving beyond
subsidies towards structural reforms.
Unlocking land supply, reforming building
norms, expanding rental housing, and
enabling developer and consumer financing
are central to this effort. By combining
targeted incentives with evidence-based
planning and state-level reforms, India
can create a robust, inclusive, and scalable
housing model-turning affordable housing
from a welfare imperative into a driver of
equitable economic development. 46
Annexure 1 47 48
Learnings from Global Best Practices
Many countries around the world have
successfully expanded affordable housing
supply through targeted public interventions,
supply side and demand-side measures. As
shown in Figure 2, Singapore has the highest
share of public housing at 75%, followed by
Hong Kong (50%), Vienna (46%), and London
(23%).
Singapore has developed about 11 lakh public
housing units, while Hong Kong has 8 lakh—
figures comparable to India’s ~8 lakh units
under PMAY in metro cities.
South Korea also undertook a massive
housing drive in the early 1990s, adding 2
million low-cost units and bringing nearly
6% of its population under public housing.
The results are striking: Vienna’s renters,
for example, pay only about a third of what
tenants in London, Paris, or Dublin spend for
similar homes.
These cases highlight how large-scale, state-
led housing provision can expand supply,
stabilize rents, and make urban housing more
affordable. The following section delves into
country-wise experiences to understand how
these models can inform India’s affordable
housing strategy.
Vienna (Austria)
Vienna has established one of the world’s
strongest affordable housing systems, where
nearly half of all residents live in public or
subsidised cooperative housing. This success
stems from deliberate state intervention
in both land and finance markets, ensuring
a continuous supply of affordable rental
units shielded from speculative pressures.
At the heart of this model, the city holds
about 3 million square metres of land
reserved exclusively for affordable housing
construction, primarily rental-based.
Land prices for such projects are capped,
and regulations stipulate that rentals
must be capped for at least 66% of the
Annexure 2 Singapore
% Public Housing
Figure 275
50
46
23
HongKong
Vienna
London 49
Singapore
Singapore’s public housing system is globally
recognised for its scale and inclusiveness,
with approximately 80% of residents living
in Housing and Development Board (HDB)
flats—providing homes for the vast majority of
citizens through systematic state-led delivery.
Home-ownership among these residents
is even more remarkable, exceeding 90%,
underscoring the effectiveness of structured,
affordable access to housing.
This success is anchored in integrated urban
and transport planning: HDB developments
are systematically located next to Mass
Rapid Transit (MRT) systems, job centres,
schools, and social infrastructure, facilitating
shorter commute times and high liveability.
The Urban Redevelopment Authority (URA)
units to guarantee long-term affordability.
This approach not only stabilises project
economics but also prevents windfall gains
from land speculation, ensuring that a
majority of units remain accessible to low-
and middle-income households over time.
Net rent is limited by law at Euro 4.97 per
square meter and land price limited to Euro
188 / sq.m.
The model is reinforced by subsidised capital.
Housing associations and limited-profit
developers can access public loans at interest
rates as low as 1%, covering a significant share
of construction costs. These loans, coupled
with modest tenant contributions and
mandatory reinvestment of surpluses, enable
a cost-rent framework where rents reflect
actual costs rather than market fluctuations.
The result is a resilient and inclusive housing
ecosystem: about 50% of Vienna’s population
currently resides in public or cooperative
housing, benefiting from rents well below
private market levels. By combining land
reserves, capped pricing with a 66% rental
requirement, and subsidised long-term
finance, Vienna demonstrates how sustained
policy design can embed affordability at the
core of urban development.
George-Washington-Hof, one of Vienna’s landmark public housing estates, represents the
city’s large-scale affordable housing model.
Source: Housing4.us (2020) 50
works closely with HDB to align land use and
transport planning.
Singapore’s affordability is further grounded
in a robust capital subsidy framework.
The state provides HDB developments
with land at below-market costs, while
households receive significant financial
support through the Central Provident
Fund (CPF) housing grants. In addition,
HDB provides concessionary housing loans
pegged at 2.6%, just 0.1 percentage point
above the CPF Ordinary Account savings rate,
making financing far more affordable than
commercial mortgages.
The cumulative outcome is transformative.
HDB estates now form the backbone of
Singapore’s urban identity, delivering
secure, high-quality, and affordable
homes at scale while fostering urban
cohesion, social integration, and widespread
homeownership. Through deliberate public
delivery, integrated planning, and targeted
financing support, Singapore demonstrates
how housing affordability can be embedded
within broader socio-economic strategies.
City Vue @ Henderson, a Housing and Development Board (HDB) public housing project in
Singapore, was completed in 2019. It illustrates high-density affordable housing integrated
with community facilities and green spaces.
Source: Bloomberg (2020)
South Korea
South Korea’s public housing system offers
a mix of short-term leases (10–30 years) and
permanent rental units, ensuring options
for different income groups. Categories such
as permanent rentals, national rentals, and
temporary leases were introduced to widen
tenure choices, while programmes like the
Happy Housing scheme target young adults
and students with rents set at 60–80% of
market rates. 51
London, UK
London’s affordable housing strategy
is anchored in the Affordable Homes
Programme (AHP) 2021–2026, which is
funded by the UK government and delivered
by Homes England and the Greater London
Authority (GLA). Nationally, the programme
To accelerate supply, the Housing
Construction Acceleration Act enabled
higher-density housing with floor-area ratios
up to 300% and buildings above five storeys.
This was supported by subsidised land
allocations and low-interest government
loans administered through institutions
such as the Korea Land and Housing
Corporation (KLHC). By reducing financing
costs and providing capital injections, these
measures encouraged developers to expand
construction of affordable rental housing at
scale.
In the early 1990s, a national housing drive
constructed over 2 million homes, creating
a significant expansion in affordable supply.
As of recent data, around 1.74 million public
rental units exist nationwide, covering nearly
6% of the population, primarily concentrated
in large metropolitan areas like Seoul.
The system is further reinforced by national
programmes such as the National Public
Rental Housing Program and targeted
initiatives like Happy House, which provide
subsidised housing below market levels for
younger households and those with moderate
incomes. The outcome has been a substantial
increase in affordable rental housing, with
diversified tenure options and price stability
that demonstrate how large-scale state-led
interventions can effectively address housing
needs during rapid urbanisation.
Housing units in Seoul, viewed from N Seoul Tower (file photo, July 14, 2025). Seoul alone
accounts for approximately 210,000 units of public lease housing, about 6.1% of its total stock.
Source: Yonhap / The Korea Herald (2025). 52
provides £11.5 billion to deliver up to 180,000
new affordable homes by March 2026.
To speed up approvals and boost delivery,
London employs the “Fast Track Route”:
developments on private land providing at
least 35% affordable housing, or 50% on
public/industrial land, can bypass detailed
viability assessments.
Capital-side support is also core. Through
AHP, the government provides capital grants
and subsidised land to local authorities
and housing associations, conditioned on
delivering affordability—typically ensuring at
least 50% of units are affordable, including
social rent, London Affordable Rent, London
Living Rent, and shared ownership
The South Kilburn Regeneration Programme, led by Brent Council, is transforming a
40-hectare estate in Zone 2 London into a sustainable, inclusive neighbourhood. Over
1,500 new homes—many affordable—have already been delivered, alongside parks, schools,
health facilities, and public realm improvements.
Source: Brent Council / nla.london
Germany
Germany’s housing affordability system
rests on a dual support framework: direct
subsidies to households through Wohngeld
(housing allowance) and subsidised capital
programmes administered by the state
development bank KfW (Kreditanstalt für
Wiederaufbau).
Wohngeld is a rent and housing cost
allowance paid directly to low-income
tenants and homeowners to bridge the
affordability gap. It is co-financed by the
federal and state governments and helps
households whose income is insufficient
to cover housing costs. Following reforms
in 2020 and 2023, eligibility was expanded,
and benefit amounts increased to reflect
rising rents and energy costs. In 2022, around
600,000 households received Wohngeld,
with federal and state governments allocating
over €1.6 billion annually to the scheme.
On the capital side, KfW housing
programmes provide highly subsidised 53
loans for home construction, purchase, and
retrofitting. Interest rates are often in the 1–3%
range, compared to market rates of 4–5%.
Programmes such as KfW Home Ownership
and Energy-Efficient Construction and
Refurbishment have channelled more than
€20 billion annually, supporting millions of
households. In 2021 alone, KfW committed
€35 billion in promotional funds for housing
and energy-efficient construction, benefitting
about 4.5 million households over the past
decade.
This dual system—Wohngeld as a
consumption subsidy and KfW as a
capital subsidy—ensures that affordability
measures support both renters and aspiring
homeowners. By directly supplementing
household budgets while also lowering
borrowing costs for construction and retrofits,
Germany has embedded affordability within
a framework that also advances energy
efficiency and long-term sustainability.
France
France’s housing affordability framework
combines a direct subsidy to households via
the Aide Personnalisée au Logement (APL)
and a subsidised loan mechanism for home
buyers through the Prêt à Taux Zéro (PTZ).
APL is a means-tested housing allowance paid
directly to tenants or homeowners via a fully
digital system managed by CAF. Applications
are typically processed within two months,
with the allowance paid retroactively from
the month following application submission.
The digitalisation of the process has helped
ease access and accelerate disbursement for
low-income households.
kisches Viertel, Berlin—one of Germany’s largest social housing estates, recently modernised
through KfW-supported energy-efficient refurbishments to maintain affordability.
Source: GESOBAU AG / Urban Sustainability Exchange 54
The PTZ is an interest-free home-purchase
loan targeted at first-time buyers. It covers
up to 50% of the purchase cost for new
apartments, with eligibility assessed by
income and property location. Recent
reforms, effective April 2025, have expanded
PTZ access nationwide—now including
detached houses and older units requiring
renovation—thereby broadening affordability
support to more households.
In terms of impact, APL and the PTZ together
support around 6 million recipients,
amounting to nearly 9% of France’s
population benefiting from housing
affordability interventions through direct
allowances or reduced financing costs.
United States
The United States addresses housing
affordability primarily through the Housing
Choice Voucher Program (often known as
Section 8). This federal initiative assists over
2.3 million low-income families by paying
a portion of their rent directly to landlords
with the tenant pays paying upto 30 per
cent of their income as rent. The average
annual subsidy is approximately $9,400 per
household.
On the finance side, the U.S. government
greatly supports housing through federal
mortgage guarantees and tax incentives.
The mortgage interest deduction allows
homeowners to deduct interest paid on
home loans from taxable income, further
subsidizing affordable homeownership.
Together, these mechanisms constitute a
dual-tiered affordability model: the Housing
Choice Voucher Program delivers direct rental
assistance, while the government-backed
finance and tax incentives make mortgage
borrowing more accessible, reducing housing
cost burdens for homeowners.
Public Housing project by Jakob + MacFarlane Architects in Paris, delivering affordable
housing units within the ZAC Masséna–Bruneseau redevelopment. It reflects France’s shift
toward design-led, sustainable, and socially inclusive housing.
Source: The Architectural Review 55
Via Verde, Bronx, New York—an award-winning affordable housing development with 222
units. The project integrates rental and cooperative homes with green roofs, community
gardens, and sustainable design features.
Source: Dattner Architects. Key Contributors
From Ministry of Finance
◆Ms. Neelam Agrawal, Director, Department of Financial Services
From Ministry of Housing and Urban Affairs
◆Mr. Vaibhav Rundawal, Deputy Secretary
From National Institution for Transforming India
(NITI) Aayog
◆Shri. Arunava Dey, Research Officer (MU)
◆Shri. Kaustubh Srivastava, Consultant Grade -I (MU)
◆Shri Akshat Thakore, Consultant Grade -I (MU)
From Foundation for Economic Development
◆Mr. Mohit Gupta, Program Lead
Other Experts
◆Debarpita Roy, Visiting Fellow – Urbanisation at Centre for Social and
Economic Progress 58
A COMPREHENSIVE
FRAMEWORK TO PROMOTE
AFFORDABLE HOUSING 59
FRAMEWORK
TO PROMOTE AFFORDABLE
HOUSING This Work is licenced under a Creative Commons
Attribution-NonCommercial-ShareAlike
4.0 International Licence.
Some right reserved
A COMPREHENSIVE
FRAMEWORK TO PROMOTE
AFFORDABLE HOUSING
Published on: December, 2025 A COMPREHENSIVE
FRAMEWORK
TO PROMOTE AFFORDABLE
HOUSING Preface
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Contents
1. BACKGROUND 10
1.1 Objective and Scope 11
1.2 Multiple definitions of affordable housing 11
1.3 Definition adopted by the Committee in this report 13
1.3.1 Improving livability 13
1.3.2 Affordability 13
1.4 Limitation of official data on affordable housing 15
2. CURRENT HOUSING SCENARIO 15
3. CHALLENGES IN HOUSING SECTOR 19
3.1 Land supply 19
3.2 Housing stock 19
3.3 Access to capital (demand and supply side) 20
3.4 Vacant house dilemma 20
3.5 Lower land consumption rate to population growth
rate (LCRPGR) in India 21
3.6 Other miscellaneous issues 21
4.CASE STUDIES 22
4.1 Brief overview of global best practices 22
4.2 Overview of best practices under PMAY-U: nationwide case studies 23
5. RECOMMENDATIONS 26
5.1 Strategic interventions to increase land supply 27
5.1.1 Zoning reforms and dedicated zoning for affordable housing 27
5.1.2 FAR relaxation & building norms (ground coverage, setbacks & parking) 27
5.1.3 Expansion of planned urban areas 28
5.1.4 Transit-oriented development (TOD) and precinct Development 29
5.1.5 Transferable development rights (TDR) 30
5.1.6 Creating land banks 31 5.2 Increase supply of affordable housing stock 32
5.2.1 Rental housing for industrial workers 32
5.2.2 Reservation for EWS/LIG housing in all real estate projects and
creation of state shelter fund 32
5.2.3 Policy for creation of a dedicated fund for affordable rental housing 33
5.2.4 Reforms in rental housing legal framework 34
5.2.5 Rationalization of municipal service charge for affordable rental
housing provided by Institutions/companies 36
5.3 Access to capital 36
5.3.1 Incentivize affordable housing projects by restoring section 80-IBA 36
5.3.2 Tax incentives for affordable housing REITs 36
5.3.3 Enhanced credit guarantee for buyers 37
5.3.4 Lower interest rate through tax free bonds 37
5.3.5 Land use charge exemption 37
5.3.6 Stamp duty and registration charge exemption 37
5.4 Other Recommendations 37
5.4.1 Promoting ease of doing business 38
5.4.2 Evidence-based planning -tackling the data gap 38
5.4.3 Capacity building 38
5.4.4 Innovative underwriting practice 38
5.4.5 Provision for O&M support 38
6. NUDGING STATES THROUGH REFORM-LINKED FINANCIAL
INCENTIVES 44
7. CONCLUSION 45
ANNEXURE 1 46
ANNEXURE 2 48 10
1. Background
India is urbanising at an unprecedented pace.
As of 2021, 35% of the population resides in
urban areas, a figure projected to reach 50%
by 2050
1
. This rapid growth is expected to lead
to a significant increase in the demand for
urban housing. Urban population estimated
at 50 crore in 2021 is expected to reach 85
crore by 2050. The dynamics of real estate
sector would amongst other factors play a
significant role in creating the demand for
urban housing.
The real estate sector is a significant pillar of
the Indian economy and its contribution is
projected to rise steadily from approximately
7% to India’s GDP in 2021 to approximately
13% by 2050. This anticipated growth
reflects the sector’s expanding role in urban
development, employment generation,
infrastructure creation, and housing.
Real estate differs from other sectors due
to its unique characteristics and structural
inefficiencies. Unlike traditional markets,
the demand-supply equation in real estate
often fails to align efficiently. Low rental
yields discourage rental housing and fuel
speculative investment in land. With land
costs forming 40-50% of project expenses in
metros, often financed outside formal credit,
the sector remains highly capital-intensive.
Construction finance is costly, limiting smaller
developers. Demand is localized, shaped by
infrastructure and job hubs, while archaic
tenancy laws and low rental yields further
constrain the formalisation of rental housing
market.
Government of India has launched multiple
initiatives to address the housing challenge.
Yet, despite numerous schemes, informal
settlements continue to grow, reflecting
the gap between the housing needs of low-
income groups and their ability to afford
formal housing. Going forward, demand for
affordable housing segment is unlikely to be
met by market forces alone, necessitating
specific government policy interventions.
1
Reforms in Urban Planning capacity in India, 2021; NITI Aayog 11
In the last decade, the Pradhan Mantri
Awas Yojana-Urban (PMAY-U) supported
the construction of nearly 1.12 crore houses
of which 96 lakh houses are complete. In
2024, PMAY-U 2.0 has also been launched
to support 1 crore additional household
of urban area with a focus on reform by
linking the benefit under the scheme with
notification of ‘Affordable Housing Policy’ by
the State Government concerned. However,
these schemes are mostly demand-driven
programmatic interventions and thus not
geared at ensuring a targeted supply of
affordable housing supported by policy
reforms. Data shows that formal housing
market remains skewed toward middle and
high-income groups, with limited supply for
the EWS and LIG.
Recognizing this gap, a committee comprising
NITI Aayog, Ministry of Housing and Urban
Affairs (MoHUA), Department of Financial
Services (DFS), and subject matter experts
was constituted under the chairpersonship
of Principal Economic Adviser, NITI Aayog.
The Committee was mandated to prepare a
detailed paper proposing a comprehensive
framework to promote and enable affordable
housing in India. The composition and Terms
of Reference (ToR) of the Committee are
provided in Annexure 1.
1.1 Objective and Scope
»The goal of this paper is to prepare a
comprehensive framework to promote
and enable affordable housing in India’s
urban areas.
»
The objective is to provide actionable
recommendations that can guide both
national and state-level efforts in:
◆Scaling affordable housing supply,
◆Improving access,
◆Streamlining processes, and
◆
Fostering sustainable and inclusive urban
growth
The scope was specifically on promoting
affordable housing in urban areas.
1.2 Multiple definitions of
affordable housing
The Committee in the first instance noted the
lack of any uniform definition of affordable
housing, with multiple definitions being used
in different context, formulated for varied
policy, financial, and programmatic purposes.
These definitions were systematically
reviewed by the Committee to develop a
comprehensive understanding of the subject,
its diverse applications and recommend a
uniform definition for purposes of this report.
Definition of affordable housing used
in various policies & reports of the GOI:
»National Urban Housing & Habitat
Policy (NUHHP), 2007: Instead of giving a
definition of affordable housing, the report
underscores the objective of making
housing accessible to EWS, LIG, and the
marginalized communities
2
.
»
Report of the High-Level Task force on
Affordable Housing for All, 2008: The Task
Force proposed a combination of criteria
based on: (i) household gross annual
income, (ii) size of the dwelling unit, and (iii)
EMI or rent as a percentage of household
income to identify the beneficiaries of
affordable housing. The Task Force also
concluded that prescribing a single,
uniform definition of affordable housing
would be counterproductive given India’s
socio-economic diversity
3
.
»
Draft National Urban Rental Housing
Policy (NURHP), 2015: Draft Policy, 2015,
recognised that affordable housing
need not be confined to ownership
and recommended a rental housing
framework for EWS, LIG, and other
vulnerable groups, addressing “need-
based rentals” for migrant workers,
2
National Urban Housing & Habitat Policy (NUHHP), 2007
3
Report of the High-Level Task force on Affordable Housing for All, 2008 12Contents
students, and government or public-sector
employees4.
Pradhan Mantri Awas Yojana Urban
(PMAY- U) 2.0, 2024:
A dwelling unit with a carpet area of up to
60 sqm in metropolitan cities and 90 sqm in
non-metropolitan areas, and a total value not
exceeding ₹45 lakh, is considered within the
affordable housing category.
Furthermore, the target beneficiaries i.e. EWS
(Annual household income < ₹ 3 lakhs), LIG (₹
3-6 lakhs) and MIG (< ₹ 9 lakhs) are classified
by income segments to ensure that benefits
and incentives are appropriately aligned to
each category with special focus on EWS.
Reserve Bank of India (RBI) - for
affordable housing for priority sector
lending (PSL) (
updated in april 2025)
The guidelines mandate location based on
population and cost of a dwelling to determine
the eligibility of individuals to seek bank loans
under the category of affordable housing in
urban areas. The guidelines updated5 in 2025
have increased the limits by 60-80%. Present
guidelines provide following limits:
Goods and Services Act, 2019:
The Act in its intent to promote affordable
housing mandates preferential rates
applicable for smaller dwellings based on the
criteria of area, cost and location as follows:
◆Maximum house value: ≤ ₹45 lakh
◆Maximum carpet area in metropolitan
cities: ≤ 60 sq. m
◆Maximum carpet area in non-metropoli-
tan cities: ≤ 90 sq. m
Harmonized Master List of
Infrastructure Sub sector – Department
of Economic Affairs, Ministry of Finance
October 2022:
Affordable housing projects are defined as
those in which “at least 50% of the permissible
Floor Area Ratio (FAR) or Floor Space Index
(FSI) is allocated to dwelling units with a
carpet area not exceeding 60 sq. m”
Population centric criteria Max Housing Loans Max Property Cost
Centres with pop. ≥ 50 lakh5063
Centres with pop. 10-50 lakh4557
Centres with pop. <10 lakh35 44
(Amount in ₹ lakh)
4 Draft National Urban Rental Housing Policy (NURHP), 2015
5 Reserve Bank of India (RBI) - for affordable housing for priority sector lending 13
1.3 Definition adopted by the
Committee in this report
1.3.1 Improving livability
Towards improving livability the Committee
proposed the goal of ensuring that every
individual has access to safe housing,
essential services, and opportunities for
social and economic mobility. In any urban/
peri-urban context, it is upheld through
three critical pillars i.e. affordable and secure
housing, holistic urban planning to provide
basic amenities, and accessible public
transport. A balanced housing ecosystem
must support both ownership and rental
options, backed by accessible home loans
and protective legal frameworks. Urban
planning plays a crucial role in shaping
inclusive, livability communities by ensuring
access to jobs, education, healthcare, and
social infrastructure. Concepts like “walk
to work,” integrated vocational hubs, and
quality public spaces enhance community
wellbeing. Public transport, as a vital
connector, must be reliable, multimodal,
and affordable, enabling equal access to
opportunities. Transit-oriented development
and value capture financing models can
drive sustainable growth while preventing
displacement.
However, this report has given special focus
on, making affordable housing an integral
part of urban planning and ensuring that
quality of life, especially for the weakest
viz. EWS/LIG are not compromised while
planning and implementing of affordable
housing projects.
1.3.2 Affordability
Housing is generally deemed affordable
when a household spends less than 30-40%
of their income on housing related expenses.
Here, the term “housing related expenses” not
only limits to the cost of ownership of house
and payment for essential services such as
water and electricity but also includes cost of
accessing the housing i.e. the rental expenses.
Therefore, if the household can afford the
dwelling either through ownership or rent,
then it is assumed that the household has
access to affordable housing.
The information pertaining to city level
household income are usually not available.
Therefore, this Committee is under the
limitation to define affordable housing in
Indian context.
The Committee recognizes that prescribing
a standard, uniform definition of affordable
housing with diverse socio-economic
backgrounds, would be counterproductive.
However, for the purposes of this report, the
following working definitions have been
adopted:
◆
Affordable house: A dwelling unit
with a carpet area of up to 60 sq. m in
metropolitan cities and 90 sq. m in non-
metropolitan cities, with a value not
exceeding ₹60 lakh in metropolitan areas
and ₹45 lakh in non-metropolitan areas.
◆
Affordable housing project: A project
in which at least 50% of the permissible
Floor Area Ratio (FAR) or Floor Space
Index (FSI) is dedicated to affordable
housing dwelling units.
The term ‘Affordable Housing,’ used in this
report refers to the above definition. These
working definitions are broadly consistent
with prevailing government guidelines,
including those under the PMAY-U framework
and RBI’s Priority Sector Lending guidelines.
In its deliberations the Committee noted that
the EWS/LIG within the broader Affordable
Housing category face particular challenges
in accessing formal housing.
1.4 Limitation of official data
on affordable housing
The Committee also noted that India lacks a
comprehensive and up-to-date official data
on affordable housing – both on demand
and supply. In absence of official data, 14
various studies and reports have relied on
periodic estimates by international property
consultants, real estate service providers, and
select think tanks. However, these datasets
differ widely in scope, methodology, and time
frame, particularly for affordable housing.
Reference to affordable housing in various
government reports over time presents a
mixed picture and does not include the basis
or detailed methodology for the estimates.
The 11th Five Year Plan (2007–12) pegged the
shortage at 2.47 crore units. The Technical
Group on urban housing for the 12
th
Five Year
Plan in its Report submitted in 2012 revised
this to 1.88 crore. Since 2015, under PMAY-U,
construction of nearly 1.12 crore houses has
been supported of which 96 lakh houses are
complete, with 1 crore additional houses will
be supported under PMAY-U2.0 by 2029. In
addition to this, affordable houses have been
constructed under various state schemes
for which the Committee did not have
data readily available. However, PMAY-U is
demand-driven it does not maintain the data
on urban housing shortage. The Committee
could not also ascertain whether similar data
is maintained by any of the state government
agencies.
For any affordable housing policy to be
effective, it must be based on reliable
and actionable data. At present, there
is a significant gap in publicly available
information on the launch, construction, and
occupancy of affordable housing projects,
as well as on the dynamics of slums and
informal settlements. Similarly, there is no
reliable data available in public domain on
houses occupied/unoccupied on rent/owned
basis despite the fact that it is collected
during decadal census operations. Without
availability of such data, it becomes difficult
to assess the effectiveness of government
interventions, monitor progress, or identify
areas requiring urgent attention.
There are independent studies estimating
the urban housing demand in the housing
sector. A CII–Knight Frank report (Dec 2024)
projects a 3.12 crore urban deficit by 2030,
while FED estimates range between 5-7 crore
units. ‘Housing for All’ targets to add another
~ 3 crore units (1 crore urban, 2 crore rural) by
2029
6
.
These divergent estimates reflect not only
varied methodologies but also different
reference periods, making direct comparison
difficult. Government data emphasizes
sanctioned and completed stock, while
private studies capture latent and future
demand, often projecting a larger deficit. This
lack of convergence risks underestimating
the true challenge.
The Committee underscores the need
for a centralized, technology-enabled
housing database to support accurate
demand assessment and evidence-based
policymaking.
6 Urban: 1 Crore urban houses during FY 2024-25 to 2028-29. Scheme guidelines, September 2024
Rural: 2 Crore additional rural houses during FY 2024-25 to 2028-29. PIB Progress of PMAY-G Rural housing targets, July 2025 15
The current state of affordable housing in
India is best understood by looking at both
the scale of the shortage and the affordability
trends across geographies. Estimates of the
housing deficit vary considerably, depending
on the methodology adopted.
2. Current Housing Scenario
Source: FED analysis (https://data.worldbank.org/indicator/EN.POP.SLUM.UR.ZS.?locations-IN: https://assets.koma.com/
content/dam/pma/pdf/2014/92/Decoding-Housing-for-al-2922.pdf)
Note: Assumption of 3.7 individuals per household in urban areas and 4.7 in rural areas has been considered for calculation
of households from population
1. Defined as Delhi, Mumbai, Chennai Kolkata Bangalore, Hyderabad, Ahmedabad and Pure 2. Defined as cities with
population 1 lakhs as per Census 2011, 3. Defined as other urban centres
◆
Deficit has been estimated
based on UN reported
estimates of lack of formal
housing
◆
The estimates are based
the global methodology
on household deprivations
where the inhabitants suffer
one or more of the following
‘household deprivations: Lack
of access to Improved water
services, Lack of access to
improved sanitation facilities,
Lack of sufficient living area
◆
Number of houses is
calculated as balancing figure
Estimates as per global methodology of lack of urban formal housing can go as
as high as 5-7 crores
Metro ¹
Urban
2
5 2-3
2-3
(40-60%)
3.8 1.8-2.3
1.5-2
(40-50%)
4.8 ~3
~1.5
(30-40%)No. of
households
(Crores)
Available
Quality Houses
(Crores)
Deficit
(Crores)
Semi Urban
3
Total 13.5 7-85-7 16
While around 96 lakhs urban houses have
been constructed under PMAY-U since 2015,
in the absence of any authentic data of the
demand for such housing, the Committee
was not in a position to identify the gap in
this segment. However, approximating from
estimates given by different sources, even
without including the houses constructed
under state schemes, the Committee was of
the view that it can be safely proposed that
this segment remains significantly under-
served, requiring specific interventions from
the Government.
The picture becomes sharper when
affordability is examined at a more granular
level covering both supply side as well
as demand side factors. As per a study
undertaken by FED, on the supply side the
cost of constructing a typical 30 sq.m. house
rises steeply from ₹6-8 lakh in rural areas to
nearly ₹25 lakh in metros, a fourfold increase.
While construction costs remain broadly
comparable across geographies, the share of
land cost changes dramatically. In rural areas,
land contributes only 10% of the total cost,
but in metros it rises to 63%, with land alone
driving up housing prices.
The same study by FED indicated that this
cost escalation is not matched by household
income growth. Average monthly household
income in rural areas is about ₹20,000,
compared to ₹47,000 in metros - an increase
of roughly 135%. This increment is far lower
than the 300-400% jump in housing costs
across the same spectrum. As a result, even
with subsidies, a majority of metro and
urban households remain unable to afford
even a standard 30 sq.m. unit, whereas rural
households have been better able to benefit
from schemes due to lower land costs.
......................
+400%
Rural
Rural
Rural UrbanUrbanMetroMetroSemi
Urban
Semi
Urban
65%
90%
54%
37%
46%
63%
35%
10%
...................................
20,000
25
5 8 17 25
17
6-8
5
22,000
28,000
47,000
Urban MetroSemi
Urban
+135%
Meeting the demand for AH is particularly challenging in metro & urban
areas due to both supply side & demand side factors
...
Housing cost in urban
areas is higher by 3-4x...
...while Income is higher by only
50-100% in urban areas
...due to higher land cost...
Cost of typical 30 sq mtr house
(INR Lakh)
Ratio of Land and Other
Construction Cost (%)
Construction
Cost
Land
Cost
Monthly household Incomes (INR)
Source: FED analysis (https://www.mospi.gov.in/sites/default/files/publication reports/Report 591 HCES 2022-
23New.pdf. https://www.ice360.in/app/uploads/2021/06/ICE-360-Proposal.pdf. https://microdata.gov.in/NADA/
index.php/catalog/213). https://arsgroup.in/blog/average-house-construction-cost-in-india-per-square-feet.html
Note: Considered average income of urban and rural areas based on monthly per capita expenditure and savings
of 15% and 20% respectively. Urban income categorization to metro, urban and semi urban has been done based
on PRICE survey 17
Market data further illustrates the imbalance
in the housing sector. Over the last decade,
housing supply has become skewed
towards high-end and luxury units, while the
affordable segment has steadily declined.
16%
19%
20%
26%30%
35%
39%
40%
40%
33%
31%
202420232022202120202019
0%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10%
28%
26%
28%
28%
24%
21%
14%
13%
16%
16%
9%
6%
8%
3%
6%
7%
3%4%
11%
AffordableMid- endHigh-endLuxuryUltra-Luxury
Budget Segmentation: Affordable (< INR 40 Lakh), Mid-end (INR 40 Lakh - INR 80 Lakh), High-end (INR 80
Lakh - INR 1.5 Cr), Luxury (INR 1.5 Cr-INR 2.5 Cr), Ultra-luxury (> INR 2.5 Cr)
Source: Indian Residential Real Estate, Annual Report 2024, Anarock
High-end housing stock is increasing while the affordable segment
witnessed a gradual decline
There is an increasing gap in supply & demand in housing stocks over the
past decade in both Tier 1 & 2 cities
◊ There is a visible gap between new supply and total absorption over the past
decade (2010-2024), especially during and post COVID.
◊ Inventory overhang reduced shows faster clearance of unsold stock.
◊
The market is moving toward sellers' market (undersupply), especially in Tier-Il
cities, which could impact affordability if supply is not ramped up.
Source: PropEquity 2025 18
In Tier-I cities, inventory overhang has
reduced because higher-end stock is being
cleared faster and not because affordable
housing supply has increased. In Tier-II cities,
undersupply has pushed the sector into a
seller’s market, driving up prices and making
affordability even more elusive.
Another important aspect of the current
housing scenario is the anomaly due to vacant
houses. Urban India has close to 1 crore
houses lying vacant, which remain outside
the housing market due to low rental yields,
weak tenancy frameworks, and litigation risks.
This results in a mismatch where new housing
demand remains unmet even as a significant
number of constructed units go unused.
In summary, the current housing scenario in
India is marked by:
◆Lack of official estimates on unmet hous-
ing demand, especially in the affordable
housing segment. Wide variation in the
available estimates from other sources,
depending on whether quantity or depri-
vation-based quality measures are used.
◆
Steep cost escalation in urban areas,
driven largely by land, which makes units
unaffordable despite subsidies.
◆
Market skewness, with supply concen-
trated in higher-value segments and
affordable stock shrinking.
◆
Underutilization of existing homes, as
high vacancy persists alongside unmet
demand.
This sets the context for understanding why
affordable housing remains a pressing policy
priority and frames the ground for examining
the structural challenges discussed in the
next section. 19
3. Challenges in Housing
Sector
The Committee notes that the ambition of
ensuring access to adequate and affordable
housing in urban India continues to face
multiple systemic barriers, is driven by a vicious
cycle of limited availability, poor affordability
and inadequate access to finance. To enable
clear understanding, the Committee
considered the issues and challenges under
five broad categories: (i) Land Supply, (ii)
Housing Stock, (iii) Access to Capital, (iv)
Vacant house dilemma, (v) Lower Land
Consumption Rate to Population Growth
Rate in India and (vi) Other miscellaneous
issues. Each category captures a set of issues
that reinforce one another, collectively
constraining the emergence of a sustainable
and inclusive affordable housing ecosystem.
3.1 Land supply
»Limited availability of land: Urban master
plans have not been effective in making
land available for affordable housing. Weak
adoption of land pooling, inadequate
provision of trunk infrastructure, and
delays in land-use conversion have further
constrained supply.
»
Increasing land prices: Rapid appreciation
in urban land values has made projects
unviable which eventually leads to high
land acquisition costs accounting for 50-
70% of total project costs, a share far
higher than in comparable infrastructure
sectors. This disproportionate cost burden
effectively excludes 75–85% of urban
households from formal housing markets.
»High acquisition costs and formal credit
constraints: Developers struggle to secure
land at scale. Land purchases are rarely
supported by formal credit channels,
forcing reliance on high-cost finance.
»
Emerging informal slums: Inadequate
planned land supply has pushed expansion
into slums, unauthorized colonies, and
peri-urban fringes, reinforcing inequitable
growth patterns.
3.2 Housing stock
»Limited housing stock supply: Developers
consistently report that margins in the
EWS/LIG segment are too thin to justify
investment. As a result, private sector
activity has concentrated on MIG and
above, leaving low-income supply heavily
dependent on public schemes.
»
MIG crowding-out EWS/LIG: Smaller-
unit markets, which are meant for EWS/
LIG, are increasingly being purchased by
middle-income households due to higher
purchasing power, particularly in metro
regions. This development further adds
to the declining stock for the EWS/LIG
segment.
»
EWS/LIG affordability: Even units sized
60 sq.m. (in metros) and 90 sq.m. (in
non-metros), while technically classified
as “affordable” under PMAY-U, often,
dwellings even less than 60 sq.m., cost
₹30–40 lakh or more, placing them
beyond the reach of EWS/LIG households
who are defined as households having 20
annual incomes below ₹6 lakh.
»
Weak frameworks to promote rental
housing: Factors like location, poor
maintenance and high rents on account of
construction costs have limited the growth
of rental housing in the affordable housing
sector. Rent Control Acts have become
archaic and do not support development
of formal rental ecosystem.
3.3 Access to capital (demand
and supply side)
»Lack of credit history & stable income
for formal loans: A large proportion of
EWS/LIG households are self-employed or
informal workers with irregular incomes
with no formal credit history. This makes
them ineligible for bank loans, even
though they are the primary target for
affordable housing.
»
High interest rates for borrowing due to
perceived risks: For those who can access
loans, interest rates are higher due to
lenders’ perception of risk. Elevated EMIs
push households into financial distress
or deter them from home ownership
altogether.
»
Affordability gap despite subsidy: In
metros, 85% of households cannot afford
a 30 sq. m. house even after subsidy,
underscoring limits of demand-driven
subsidies.
»
High-risk perception for developers:
Affordable housing is regarded as a high-
risk, low-return segment. Banks and
NBFCs hesitate to lend, and when they
do, it is at higher rates and shorter tenures,
making projects financially unattractive
for investors and developers.
»
Lack of infra financing benefits: While
affordable housing has been given
infrastructure status, the affordable
housing projects have not been able
to leverage opportunities of ECB
access or Viability Gap Funding (VGF).
This inconsistency makes housing
less competitive compared to other
infrastructure sectors like roads or power.
»
Tax and regulatory barriers: Notional
capital gains taxation discourages
landowners in redevelopment projects,
while low rental yields and eviction
hurdles deter private rental investments.
3.4 Vacant house dilemma
»Vacant but unavailable housing: India
has nearly 1 crore vacant houses in urban
areas, but these remain locked due to low
rental yields, weak tenancy laws, and fear
of litigation, thereby denying housing to
those in need. Similarly, there are a number
of land parcels which are either vacant or
the built-up area is significantly lower than
the maximum permissible built-up area
»
Restrictive tenancy framework: Rent
control and tenancy laws in many states
discourage owners from renting out
properties, as repossessing houses can be
lengthy, uncertain, and costly.
◊
Litigation risks: Property owners fear
tenants overstaying, non-payment of
rent, and prolonged legal disputes,
which often leads them to keep houses
locked instead of leasing/renting them.
◊ Low rental yields: Rental returns in
most Indian cities are typically only
2–3% of property value annually,
offering limited incentive to rent
compared to capital appreciation.
◊
Informal occupancy patterns: The
absence of robust formal tenancy
mechanisms pushes both landlords and
tenants into informal arrangements,
increasing uncertainty and disputes.
◊
Impact on housing availability: This
combination of legal, economic,
and regulatory barriers prevents the
release of vacant housing stock into
the market, inflating demand-supply 21
gaps and pushing low- and middle-
income households into informal or
overcrowded housing.
»
These aspects drive out institutional
investment from the rental housing sector.
3.5 Lower land consumption
rate to population growth rate
(LCRPGR) in India
A persistently low LCRPGR can escalate land
values, fostering informal settlements, and
overburden existing infrastructure, even
where progressive regulatory tools such as
FARs are in place.
India’s urban land per person remains low
at 46 m² in 2020, compared to the global
average of 143 m². Between 2015 and 2020,
China’s Built-up Area (BuA) per person rose
by 20%, compared to 14% increase in India
during the same period.
LCRPGR data further highlight India’s lag,
with a rate of just 1.8 in 2019 significantly
lower than Thailand (3.3), China (4.3), and
Korea (3.9). Vietnam, (3.1). These comparative
benchmarks underscore the urgency of
accelerating planned city expansion in India
to improve land use efficiency, reduce land
price pressures, and align with global urban
development trends.
LCRPGR in SE Asian countries in 2019
3.6 Other miscellaneous issues
»Bias toward ownership models: Existing
policies overwhelmingly promote
ownership, even though rental housing is
a critical need for everyone especially for
migrants, industrial workers, and the urban
poor. This imbalance reduces flexibility in
meeting diverse housing needs.
»
Absence of authentic data: Lack of
authentic data on demand for affordable
housing hinders evidence-based
policymaking.
»
Fragmented governance: Affordable
housing spans multiple agencies (urban
local bodies, state housing boards,
development authorities, and financial
institutions), with overlapping mandates
and slow approval systems. This results in
procedural delays, weak coordination,
and poor accountability.
»
Short-term subsidy focus: Current
schemes prioritize upfront cost reduction
through subsidies, without addressing
long-term factors such as maintenance,
affordability over time, and the
sustainability of the housing stock.
»
Life cycle costs: The focus of government
schemes has not sufficiently addressed
the issue of meeting the maintenance
of houses made for the EWS categories,
especially in multi-storied dwellings
thus making them less attractive for the
beneficiaries.
These issues form a web of mutually
reinforcing structural barriers resulting
in limited success in urban areas, The
Committee, therefore, concludes that only a
comprehensive, market enabling and reform-
linked approach is needed to break this cycle.
Country LCRPGR
China 4.3
Korea 3.9
Thailand 3.3
Sri Lanka 3.4
Vietnam 3.1 22
4.Case Studies
4.1 Brief overview of global best practices
The Committee referred to the various global best practices for affordable housing as shown in
the following table. Further details are in Annexure – 2.
Country Approach Key InstrumentsImpact
Vienna
Public housing
through Rental
model
Capped land prices
1% interest public loans
Long-term rent
control
50% of population
lives in affordable
public/co-op
housing
Singapore
Hong Kong
Mass public housing
through Ownership
model
HDB/HA-owned supply
Integrated planning with
transit/jobs
Income-linked resale
& rental
70–80% population
in public flats
South Korea
High-density, state-
led mass housing.
Focus on rentals
(with ownership
options)
FAR relaxation (300%+)
State-led land acquisition
Public-private
development
Over 2 million homes
built in 1990s housing
drive
UK/
Germany/
France
Demand-side
support
Housing vouchers (APL,
Wohngeld)
Subsidized mortgages
(1–3%)
Digital benefit systems
Millions reached;
rapid disbursement
& private
developer role
United States
Tax-driven private
capital mobilization
Low-Income Housing Tax
Credit: 10-year federal tax
credits
Competitive state-level
allocations
Long-term affordability
mandates
3M+ affordable rental
units created since 1986
India
Demand-side
support
Subsidy provided to eligible
beneficiaries for purchase
of housing.
Rental subsidies provided
for beneficiaries opting for
the rental option.
9.6 million affordable
houses constructed
with 10 million houses
under in pipeline 23
Learnings from other countries:
Increase land supply
◆Dedicated Zoning to increase supply of
land for affordable housing (Vienna and
South Korea)
◆
Liberalize bye-laws for affordable hous-
ing units (South Korea and London)
◆
Plan areas at city outskirts to reduce
burden on city area (S korea)
Build Housing stock
◆City to provide land for affordable
housing projects (Vienna, S Korea and
London)
Access to capital and other
recommendations
◆Provide loans at low interest rates for
affordable housing projects (Vienna,
South Korea)
vis-à-vis the existing status in India
◆No dedicated zoning for affordable housing
◆
No existing framework for differentiated bye
laws for affordable housing
◆
Limited and low scale public / PPP projects
(E.g. Sanand in Gujarat)
◆
Shelter fund policy in specific states like Tamil
Nadu
◊ Demand side:
◆Interest subsidy under PMAY-U to buyer
◆
Housing credit classified under Priority
sector lending
◆Credit guarantee of upto INR 20 lacs loans
(Credit Risk Guarantee Fund Trust for Low
Income Housing)
◊ Supply side: No significant interventions
4.2 Overview of best practices
under PMAY-U: nationwide
case studies
In pursuance of the Government of India’s
vision of “Housing for All,” the Ministry of
Housing and Urban Affairs (MoHUA) has
been implementing the Pradhan Mantri
Awas Yojana – Urban (PMAY-U) since 25
June 2015. Under this flagship mission, the
Ministry provides central assistance to States
and Union Territories to address the housing
requirements of people belonging to the
EWS, LIG, and MIG categories through various
sub-schemes. Under the mission, about 122
lakh houses have been sanctioned, of which
more than 96 lakh have been completed and
delivered to beneficiaries across the country.
Building on the success of the scheme, the
Union Cabinet has approved the second phase
of the mission, targeting the construction of
1 crore additional houses for the urban poor
over the next five years.
Across India, States/UTs have implemented
a range of innovative and context-specific
strategies under the PMAY-U to strengthen
delivery of affordable housing. These initiatives
highlight the need efficacy, innovation,
inclusion, and convergence in meeting the
demand for housing. These interventions
have aimed at enhancing financial access,
accelerating construction, ensuring tenure
security and promoting sustainable urban
development. Some of these initiatives are
given below: 24
State
Best Practices
Adopted
Impact
Madhya
Pradesh
Model Tripartite
Agreement to integrate
EWS beneficiaries into
formal financial system.
The tripartite agreement among Banks/HFCs, ULBs and PMAY-U beneficiaries made ULBs guarantors
for EWS loans, achieving high occupancy and easing
financing, later replicated by other States.
Uttar
Pradesh
Advance Financial
Assistance for Faster
House Construction
To accelerate house construction under the BLC
vertical, the State Government provided ₹50,000
advance assistance post-sanction, boosting
confidence, speeding construction, and securing
top performance under PMAY-U.
Andhra
Pradesh
Special Drive to
Provide Housing Sites
Allotted housing sites and land pattas in women’s
names, adopted low-cost technologies, and offered
3% loans for beneficiary contributions.
Gujarat Affordable Housing
Zoning Reforms
Gujarat’s Town Planning (TP) Scheme is a land
pooling system that enables planned urban growth
by reorganizing private land for infrastructure and
amenities, then returning serviced plots to owners.
It supports equitable development and has been
key in reserving land for affordable housing and
slum redevelopment
Maharashtra
Policy Concessions
and Process Reforms
To overcome high land costs and regulatory hurdles
in affordable housing, Maharashtra introduced key
policy reforms under PMAY-U like providing Govt.
land at ₹1/sqm, higher FSI, and reduced stamp duty,
lowering costs and promoting private participation.
Rajasthan Policy reform
To promote affordable housing for EWS and LIG, the
Government offers 25% free land, fee exemptions,
and FAR up to 2.25 to developers at a government-
fixed sale price, thereby encouraging active private
sector participation in projects on government land.
Kerala
Multi-Faceted
Convergence and
Community-Based
Model
The LIFE Mission integrated housing with livelihood,
health, and skill support, empowering communities
through multi-sectoral convergence with PMAY-U.
This inclusive, multi-stakeholder model enhanced
coverage, community empowerment, and
sustainable urban development.
Tamil
Nadu
Promotion of Rental
Housing
Tamil Nadu has been leader in providing affordable
rental housing, especially industrial worker housing
and working women housing by converging efforts
of PMAY-Urban and State incentives including
innovative financing through TNIFMC. 25
Haryana
Incentivisation Policy
for Affordable Group
Housing Projects
The policy boosts affordable group housing through
clear norms and developer incentives, permitting
limited commercial use (up to 8%). Fee waivers,
EDC incentives, and transparent, government-
supervised allotment make it a strong model of
public–private collaboration ensuring affordability
and timely Q.
Various states have also adopted innovative
models for focusing on empowering women,
slum redevelopment etc. Some of these are
presented as below:
»
Tamil Nadu, Rajasthan, West Bengal,
Jharkhand, Karala and Odisha have lever-
aged self-help group (SHG) networks for
on-ground monitoring of PMAY-U proj
-
ects, where women’s groups supervise
construction quality, support geo-tag
-
ging, ensure timely instalment release, and
motivate beneficiaries to complete houses
promptly.
»
Andhra Pradesh, Tamil Nadu, Odisha and
Rajasthan have advanced housing ini -
tiatives for the urban poor. Tamil Nadu
has effectively implemented slum rede
-
velopment projects and provided land-
rights-based housing support for landless
families, while Rajasthan’s strategy of
granting land rights to landless beneficia-
ries has enabled vulnerable households to
build affordable homes and expand the
housing stock for the poorest sections.
»Under the PMAY-U, In-Situ Slum Redevel-
opment projects have been successfully
implemented by several States, including
Gujarat, Odisha, Tamil Nadu, Maharashtra
etc. to rehabilitate slum dwellers by pro-
viding decent, permanent housing with
essential amenities free of cost. These
projects have transformed informal set
-
tlements into well-serviced, livable com-
munities without displacing slum dwellers
from their original locations. While imple-
menting slum upgrading projects, States
have actively partnered with Civil Soci-
ety Organizations (CSOs) for community
mobilization, beneficiary identification
and participatory planning. This collab
-
orative approach has strengthened the
inclusiveness, transparency, and long-term
sustainability of the slum redevelopment
process.
In summary, global experiences show that
no single measure is enough; successful
affordable housing strategies combine land
availability, supply-side incentives, financing
support, and rental housing expansion.
Building on the lessons from international
experiences, addressing India’s affordable
housing challenge will require a mix of
structural reforms, targeted incentives,
and innovative financing mechanisms.
While global models cannot be replicated
wholesale, they offer valuable insights that
can be adapted to India’s unique urban
and socio-economic context. The following
section outlines a set of actionable steps to
bridge the affordability gap and create a
sustainable housing ecosystem.
The Committee is of view that the these
global and national best practices need to be
widely disseminated amongst states to help
them evolve policy initiatives . Policy reforms
are needed to crowd in private investments
and promote rental housing to meet future
shortage of affordable housing. 26
5.0 Recommendations
The global experiences underline the need for
having a multipronged approach to address
the demand for affordable housing, including
land reforms, supply-side incentives,
innovative financing and rental housing
frameworks. For India, the challenge is to
adapt these lessons to its urban realities and
build a model that is contextual and achieves
the balance between affordability and
ensuring financial viability for these projects.
While the PMAY has substantially reduced
India’s housing deficit, the program alone
cannot cater to the full range of affordable
and rental housing needs. Broader reforms
in land, finance, and tenancy are, therefore,
essential.
Following broad strategies are suggested
as critical pathways for shaping India’s
affordable housing agenda:
»
Increase land supply: Ensure ways to defray
cost of land for affordable housing projects
and improve supply of serviced land.
»
Housing stock supply: Enable investments
in affordable housing projects by
promoting PPPs, establish dedicated
funds, publish model project structuring
frameworks that address life cycle cost and
rental accommodation.
»
Access to capital: Address the need for
access to capital for both the developers
and buyers. Provide differentiated
financing, and usher in broader reforms
that incentivizes affordable housing,
including tax reforms with rationalized
municipal service charges.
»
Promoting Tenancy Reforms would
be crucial to promote rental housing
sector, reduce vacant houses in urban
areas and unlock these underutilized
assets. By making the rental market more
secure and attractive, tenancy reforms
would not only increase the availability
of affordable housing but also optimize
the use of existing urban infrastructure.
This approach reduces pressure on new
housing construction, curbs urban sprawl,
and supports more sustainable urban
development.
»
Other Reforms: Address the data gap in 27
this sector to promote evidence-based
planning for improved policies and
capacity building as well as monitoring
the progress.
5.1 Strategic interventions to
increase land supply
5.1.1 Zoning reforms and dedicated
zoning for affordable housing
Expanding the availability of land is one of
the most important initiatives that needs
to be taken to enable affordable housing at
scale. It is proposed to designate Affordable
Housing Zones within city Master Plans and
Town Planning Schemes, with a minimum
of 10% of all residential land earmarked
for this purpose. Such zoning provisions
would systematically nudge both Urban
Local Bodies (ULBs) and private real estate
developers to deliver dedicated affordable
housing projects, thereby ensuring land
supply does not become a structural barrier
to meeting demand.
This measure can be adopted by States
through future Master Plans , Town Planning
Schemes and Land Pooling Schemes,
especially in new development zones and
fast-growing Tier-II/III cities, where serviced
land is currently scarce
5.1.2 FAR relaxation & building
norms (ground coverage, setbacks &
parking)
Targeted reforms in building regulations can
allow higher density development and reduce
unnecessary cost burdens. It is recommended
that the permissible Floor Area Ratio (FAR)
may be increased from the prevailing 1.5–3
range to at least 5-6 for affordable housing
projects.
Complementary relaxations in development
norms can further facilitate project finance
making them more attractive and viable.
For example, capping parking requirements
at 10% for affordable housing, rationalizing
setback norms to 3-5 meters for high-rise
buildings (>18 m) and 0 - 2 meters for other
multi storied structures, rationalizing/
lowering ground coverage restrictions,
recalibrating density norms at zonal or city
level to reflect the unique requirements of
affordable housing projects are some of the
norms that need to be considered in this
regard.
Applicable through notification of FAR
and building norm relaxations in building
bye-laws by States and ULBs. It can also be
implemented through revisions in State
Unified Building Bye-laws and city level
Development Control Regulations. Relevant
for brownfield redevelopment and for
greenfield clusters earmarked for affordable
housing.
Vienna has long institutionalized land-
use regulations that mandate a significant
share of residential land for subsidized and
affordable housing, ensuring a continuous
pipeline of supply while keeping housing
costs stable.
South Korea similarly adopts a zoning-
based approach, acquiring and reserving a
proportion of developable land specifically
for public and affordable housing. These
practices demonstrate how integrating
affordability mandates within urban
planning frameworks can create predictable
land availability, incentivize developers, and
safeguard inclusivity in fast-growing urban
areas. 28
Many countries have rationalized building
bye-laws to enhance the attractiveness of
affordable housing projects for developed.
Singapore, Malaysia, Hong Kong, and
the Philippines have enabled large-scale
affordable housing supply by allowing higher
FAR for affordable housing. These countries
allow FARs above 8, while in South Korea,
the permitted FAR is set at 2.5 and can be
increased to 3 for projects that include
affordable housing units. For redevelopment
projects undertaken in partnership with
state authorities, the FAR allowance is further
raised to 5. In New York, FAR goes up to 15
and can reach 18 for projects that include
affordable housing units. Los Angeles also
allows FAR of 3-13 which increases by 30-
55% for 100% affordable housing projects.
Japan provides another notable example,
where flexible building codes have supported
compact, high-density, yet high-quality
housing development in dense urban areas.
These examples demonstrate how flexible
building norms and regulatory adaptability
can unlock land value, enhance housing
density, reduce project cost, and enable
large-scale delivery of affordable housing.
Multiple states in India like Gujarat, UP and
Maharashtra have removed ground coverage
requirements and allowed ~2sq.m. of parking
area per dwelling unit for affordable housing
units.
5.1.3 Expansion of planned urban
areas
Affordable housing at scale requires a
significant reduction in urban land costs,
which can only be achieved through an
expansion in the supply of serviced land.
Planned urban extensions, supported
by essential infrastructure and strong
connectivity, are critical to creating land
reserves dedicated to affordable housing.
By easing scarcity pressures, this approach
lowers entry barriers for both developers and
households.
To strengthen housing supply, it is
recommended that States prioritize the
acquisition and planned development of new
land, particularly on city outskirts and in peri-
urban areas. Such land can be strategically
designated as affordable housing zones,
equipped with trunk infrastructure, public
transport, and social amenities. This approach
prevents unplanned sprawl while enabling
large-scale, organized expansion.
Advanced monitoring tools, such as satellite
imagery and spatial analytics, should be
adopted to track land use changes, assess
growth patterns, and guide evidence-based
planning. Integrating housing, infrastructure,
and mobility in expansions beyond municipal
limits will allow States to manage urban
growth more effectively and mitigate the
risks of disorderly development.
In parallel, States should be encouraged to
leverage Public-Private Partnerships (PPPs)
to develop urban extensions. By integrating
housing with transport and basic services,
PPPs can accelerate the delivery of serviced
land, balance risks between public and private
stakeholders, and ensure that expansion
benefits both developers and low- to middle-
income households. Notably, Gujarat and
Maharashtra have pioneered Town Planning
Schemes that pool and service peri-urban
land, demonstrating how orderly expansion
can simultaneously provide infrastructure
and preserve affordability.
Through adoption of peri-urban land pooling
and Town Planning Schemes by States to
systematically extend serviced areas across
essential infrastructure and connectivity
nodes. Also, through leveraging underutilized
brownfield sites within city cores for
affordable housing. 29
Seoul, South Korea: During 1960s, many
illegal settlements were formed in Seoul due
to explosive population growth. Between
1989 and 1996, five major new towns with
the planned housing units ranging from
40,000 to 100,000 each just outside of
the Seoul’s greenbelt were constructed to
support balanced urban growth by creating
self-contained satellite cities with housing,
jobs, and infrastructure. Seoul coordinated
the large-scale planning and massive
mobilization of public and private resources.
The plan also contained transportation
networks, including roads and subway
extensions, parks, regional heating system,
and other urban public infrastructure.
Recommendation: The acquisition of new
land and planning to improve affordable
housing stock, availability of public transport
and social amenities would improve the
affordability and quality of housing stock.
To ensure sustainable growth, it is also
recommended that States must actively
monitor Land Consumption Rate to
Population Growth Rate (LCRPGR).
5.1.4 Transit-oriented development
(TOD) and precinct development
Affordable housing can be more effectively
integrated with city infrastructure by
embedding it within Transit Oriented
Development frameworks. It is recommended
that cities should earmark areas near metro
and mass transit stations exclusively for
mixed-use development, combining offices,
commercial spaces, and affordable housing.
This approach would simultaneously expand
the housing stock and improve access to jobs
and services, reducing commuting costs for
low-income households. These can form ToD
precincts in which more relaxed and lighter
byelaws may apply to promote growth.
Within these TOD precincts, affordable
housing projects should be permitted with
an FAR of up to 8, along with exemption
from parking requirements to lower costs
and optimize land use. Density norms may
be revised upwards to around 1,000 units/
hectare, ensuring compact yet liveable
environments. By enabling higher FAR with
dedicated density thresholds, TOD based
affordable housing also disincentivize
gentrification, while making efficient use of
urban land close to transit nodes.
Value Capture Financing (VCF) mechanisms
should also be institutionalized so that
the rise in land and property values due to
infrastructure projects (like metros, highways,
and ring roads) can be harnessed to fund
both infrastructure and affordable housing.
In India, several TOD policies have already
been introduced but remain inconsistently
implemented. For instance, in Mumbai,
the Development Control and Promotion
Regulations (DCPR) 2034 designates TOD
zones within 500 metres of metro and
monorail stations. Similarly, in Delhi, TOD
zones are defined as a 2 km corridor with
a 300-metre influence area on either side
of metro lines. While density norms have
been specified (up to 800 dwelling units
per hectare) and minimum housing unit
allocations mandated clear FAR benchmarks
are absent. It has gained limited traction
due to lack of private sector participation.
However, pilot projects, such as the one at
Karkardooma, Delhi remain incomplete
even after 14 years due to an overreliance on
government led development rather than
unlocking potential through zoning reforms
and FAR relaxation for private developers.
For TOD to realize its transformative role in
affordable housing, States need to establish
clear FAR benchmarks, priority for affordable
housing within these precincts, and 30
streamlined approvals. Coordinated planning
among state urban bodies, transport bodies,
development authorities and other line
departments is equally critical.
Curitiba in Brazil provides a strong example
of TOD implementation. The city defined
TOD zones along its major transport corridors
and adjoining lanes, permitting FAR of 4 (as
against FAR of 1 in other adjoining areas),
extendable to 6 around structural axes using
Transferable Development Rights (TDRs).
This model enabled compact, high-density
development aligned with public transit,
reducing urban sprawl and ensuring that
affordable housing was built near job hubs
and services. California has removed parking
requirements near major transit stations and
allows 100-120% density bonus and 40-55%
FAR bonus. Dwelling units / hectare vary from
250-950 in Los Angeles, 1000+ in Hong Kong
and ~1,500-2500 in New York.
For cities with operational or planned
metro and rapid transit systems. TOD-linked
affordable housing can be advanced through
greenfield corridors as well as brownfield
precinct redevelopment within 500 m
influence zones around existing transport
nodes.
5.1.5 Transferable development
rights (TDR)
To improve the viability of affordable housing
projects, developers need to be permitted to
sell unused TDRs, provided the corresponding
FAR is not utilized on the original land
parcel for a minimum period of 50 years.
Furthermore, all TDR restrictions should
be made publicly available through online
registries to improve transparency for buyers
and investors.
At present, most states restrict TDR usage to
land acquired for public purposes, limiting its
utility in unlocking land supply. The scope of
TDR should be expanded to cover not only
land surrendered to the government but
also land retained by owners with limited or
partial development potential. This would
provide flexibility in land markets, channel
development rights to high-demand areas,
and reduce project costs for affordable
housing.
In Maharashtra, TDR is permitted for land
acquired for public purposes, heritage
conservation, and slum rehabilitation.
Typically, 2–3 times TDR is granted, with
Development Rights Certificates issued only
when land is surrendered free of cost to the
authorities. TDR loading is allowed in the
range of 30–70% (equivalent to 0.5–1.5 FAR). In
Telangana, provisions allow the construction
of one additional floor without requiring
changes to setback norms, reflecting a
more flexible approach. However, across
most states, usage remains limited and
fragmented.
Expanding coverage of TDR can unlock
under-utilized land parcels and make
affordable housing financially sustainable.
Development rights currently restricted in
airport zones, forest areas, and heritage sites
should also be made usable through TDR for
procurement of affordable housing project, in
addition to land acquired for public purposes.
Such rights should be transferable both for
land surrendered to authorities and for
land retained by owners, thereby creating a
secondary market in development rights that
improves liquidity and efficiency.
Expansion of TDR frameworks beyond
public purpose land to include brownfield 31
Globally, several best practices present
interesting insights in this regard as indicated
below
◆
Seattle: The city permits TDR generated
by affordable housing projects to be sold,
creating a transparent market mechanism
that channels value directly back to low-
cost housing initiatives.
◆
New York: A structured TDR framework
defines sending and receiving sites, with
prices determined by market forces.
Transfers are capped at 20% of the receiv-
ing unit’s FAR, ensuring balanced growth
while enabling land value capture.
◆São Paulo (Brazil): Deployed TDR for heri-
tage conservation and affordable housing
by creating a transparent, tradable market
for development rights.
redevelopment areas, with transparent
registries that can be adopted across
metropolitan regions and emerging urban
centres to improve land market liquidity.
5.1.6 Creating land banks
Creation of land banks can provide a steady
pipeline of land for Affordable Housing
projects and associated infrastructure
through creative redevelopment. Government
may explore the possibility of mapping and
aggregating vacant or underutilised land
under various ministries, departments and
Central/State Public Sector Undertakings
(PSUs), and bring them into land banks. Land
parcels from such banks may be leased to
public/private agencies for 30-50 years lease,
without possibility of renewal, enabling them
to undertake the construction of affordable
housing (particularly rental housing) and
associated infrastructure creation. This
inventory should be digitally accessible to
enable transparent planning and allocation.
The inventory should not only list the vacant
land parcels in the Residential zones /
affordable housing zones but also list the
vacant and underutilized land held by
government departments and PSUs, such as
the Railways, Airport Authority of India, and
Defence.
»
The Indian Railways alone holds ~460 sq.
km of vacant land, constituting nearly 10%
of its total landholding.
»Defence authorities hold ~182 square km
of vacant land.
Through this model, the land ownership shall
remain with the concerned department/
public bodies, PSU or other land-owning
agencies, while unlocking land value for
public good. After expiry of lease period land
will again be available for redevelopment to
land owning agencies. This model can remove
land from equation and foster housing and
public infrastructure development which is
devoid of speculative investment.
Within India, Kerala has developed a
state-level land bank, though primarily
focused on industrial use, while Jharkhand
has mapped 2.1 million acres of land for
infrastructure and industrial purposes. A
notable housing-specific example is the
Dharavi Redevelopment Project in Mumbai,
where 47.5 acres of railway land in Mahim
were leased for 30 years to deliver over 10,000
housing units for railway staff, slum dwellers,
and local residents. 32
Internationally, Vienna has established a
land bank of 3 million sq. m by repurposing
underutilized rail corridors, empty hospitals,
and surplus public property for affordable
housing. In Seoul, South Korea, has
converted military-owned golf course into
sites for 10,000 apartments. Further, the
Korea Land and Housing Corporation (LH)
develops peri-urban areas into planned new
towns, integrating affordable housing with
infrastructure from the outset.
In Singapore, the Housing and Development
Board (HDB) acquires and banks land
centrally, releasing it systematically for
public housing projects. This approach has
enabled over 80% of the population to access
affordable homes.
In Cleveland, USA, municipal land banks
reclaim tax-delinquent or abandoned parcels
and repurpose them for affordable housing
and community development.
5.2 Increase supply of
affordable housing stocks
5.2.1 Rental housing for industrial
workers
Ensuring access to affordable rental housing
for industrial and informal sector workers
is critical to strengthen urban economies
and avoiding the proliferation of informal
settlements. Worker housing on rental basis
should be developed in close proximity to
industrial hubs, manufacturing clusters, and
logistics corridors to reduce commuting time
and costs, while improving productivity and
quality of life.
The Ministry of Housing and Urban Affairs
(MoHUA) has already laid out industrial and
employee housing models (under Affordable
rental housing models and SAFE housing
model), which states and urban local bodies
can adapt to local contexts. These models
emphasise public-private partnerships,
integration of worker housing into industrial
development plans, and leveraging incentives
such as higher FAR and reduced approval
timelines for projects that include worker
accommodation.
Integrating worker housing into a broader
slum avoidance and formalization strategy is
equally important. By proactively providing
formal, serviced housing near employment
centres, cities can reduce the pressure on
informal settlements and ensure workers have
access to basic services such as sanitation,
clean water, and transit connectivity. This
approach also contributes to urban resilience
by preventing the creation of unplanned
settlements that are difficult and costly to
upgrade later.
5.2.2 Reservation for EWS/LIG
housing in all real estate projects
and creation of state shelter fund
To ensure a steady supply of affordable
housing in rapidly growing urban areas, there
should be a mandatory reservation of 10-15%
of the built-up area for EWS/LIG housing in
all housing & commercial projects exceeding
10,000 sqm built-up area or 5,000 sqm
plot area. This mandate would significantly
expand the availability of housing stock under
the affordable category while ensuring that
such units are integrated within mainstream
urban development.
In cases where the builder is unable to
construct the reserved units within the same
project site due to any justified reasons,
provision may be made for construction of the
reserved housing units within a 4-kilometer
radius from the original project site thereby
maintaining accessibility to urban services
and employment opportunities. Additionally,
flexibility may be provided for developers to
partner with specialized agencies or third-
party developers for constructing the same
reserved units on their behalf. 33
If none of the above options are not feasible,
developers should be required to contribute
to a dedicated Shelter Fund roughly twice
the prevailing cost of construction, in order
to account for the project’s land value. The
option to contribute to shelter fund should
be seamless/automatic and not subject to
validation by authorities on possibility of
creating EWS/LIG units
However, for the projects beyond 1,000
sqm of built-up area, developers should be
mandated to contribute to the Shelter Fund.
Such contributions must be transparently
assessed and periodically revised to reflect
prevailing construction costs, thereby
ensuring adequate and sustainable financing
for affordable housing initiatives.
The dedicated fund can also be strengthened
by collecting 1.1-3% of registration value from
residential and commercial units. States may
additionally allow the sale and purchase
of the credits of the said fund, creating a
market for financing affordable housing. The
fund should be utilized as a capital grant
for affordable housing, with the percentage
allocation to be determined on a case-to-case
basis by the fund manager.
Such a multi-pronged mechanism would
ensure that compliance is practical for
developers, while also guaranteeing a cross
subsidization of affordable housing. It will also
ensure continuous flow of resources, either
in the form of new housing stocks or corpus
funds for the affordable housing. Some
examples of the policy broadly exist in Tamil
Nadu, Maharashtra, Telangana, Rajasthan
and West Bengal. The provisions need to be
strengthened, aligned with other reforms
and rates should be rationalised to promote
creation of additional stock. Further, similar
policies need to be adopted by other States.
Tamil Nadu has pioneered in this regard
by having reservations for EWS Housing
and setting up a dedicated fund called the
Tamil Nadu Shelter Fund. Tier-I fund is a
government regulated fund which receives
funds from the various sources like levy of
fees such as shelter charges (1-3% of guideline
value) and other collections approved by the
Government. A substantial portion of the fund
is used to finance the housing projects by the
Government including the grant component
of State Housing Schemes/ state government
share in the Centrally Sponsored Housing
Schemes.
5.2.3 Policy for creation of a
dedicated fund for affordable rental
housing
In continuation of earlier recommendations,
it is proposed to establish a dedicated fund
to provide long-term financing for affordable
rental housing, thereby reducing reliance
on direct subsidies. This may be achieved in
following manner:
»
Institutions such as the National Housing
Bank (NHB) and Housing and Urban
Development Corporation (HUDCO) may
be engaged, with access to low-cost capital
sourced through tax-free bonds or Priority
Sector Lending (PSL) shortfalls.
»
Enabling External Commercial Borrowings
(ECBs) and granting relief from the
Minimum Alternate Tax (MAT), payable
under Section 115JB of the Income Tax Act,
to support the development of particularly
affordable rental housing.
This dedicated fund may be deployed towards
Shelter Fund (Tier-1) in Tamil Nadu 34
investments in rental housing, including
industrial worker accommodation, hostels
for working women, and similar projects.
To ensure professional management,
transparency, and accountability, the
investment committees should comprise a
majority of representatives from the private
sector. The fund should be managed in a
professional manner and designed to offer a
comprehensive suite of financing instruments
for affordable housing projects, including
equity finance, mezzanine finance, debt, and
subordinate debt.
Not everyone in a city needs to own a house,
nor is ownership always the most practical
or desirable solution. Urban populations
are highly mobile, with large segments
comprising migrants, students, industrial
workers, and low-income households who
often require flexibility and mobility rather
than permanent ownership. A balanced
housing ecosystem must therefore provide
both ownership and rental options, ensuring
that people can choose according to their
income levels, life stage, and mobility needs.
For this to work, rental housing must be
supported through clear legal frameworks
that safeguard both tenants and landlords,
while home ownership must be made more
accessible through affordable and inclusive
housing finance options. Building such
an ecosystem would reduce pressure on
ownership-based schemes, make cities more
inclusive, and respond more effectively to the
diversity of housing demand.
Acknowledging the importance of
requirements of rental housing, the Ministry
of Housing and Urban Affairs shared the
Model Tenancy Act (MTA) 2021 with States/
UTs for adoption by either legislating new law
or amend the existing rental laws on lines of
5.2.4 Reforms in rental housing legal framework
Shelter Funds (Tier- 2) in Tamil Nadu
◆Tier-II fund is registered with SEBI as Social
Alternative Investment Fund and is man-
aged by Tamil Nadu Infrastructure Fund
Management Corporation Limited
◆
Gov. of TN is an anchor investor. This money
is used to mobilise institutional and private
capital from other sources such as ADB
and World Bank to fund affordable hous-
ing projects such as ownership, rental,
co-living, student/senior housing, women’s
hostel.
◆
The fund is managed professionally by
Investment Committee (IC) comprising of
industry experts. IC approves the invest-
ment/exit proposals submitted by the
Investment Team.
◆
Current portfolio includes Tamil Nadu
Working Women’s Hostels Corporation
Limited. Tamil Nadu Industrial Housing
Private Limited, Ambur Properties Private
Limited. Kaivalyam Eco-Life Private Lim-
ited etc.
◆
Tier-II fund has added approximately
16000 rental beds, and 6000 affordable
housing units are under development
◆
Six private projects and eight public-pri-
vate partnership projects with a combined
project cost of $130 million are in pipe-
line. Of this, $67 million was invested by
TNSF. Focusing on industrial and afford
-
able housing across cities such as Coim-
batore, Chennai, Madurai, and Hosur, 47%
of the investments were directed towards
Tier I cities and 38% towards Tier II cities,
demonstrating a balanced approach to
urban development. 35
MTA that aims to promote rental housing
by balancing and protecting the rights and
interests of both the tenants and landlords
by regulating renting of premises in an
efficient and transparent manner. It will also
help in overhauling the legal framework with
respect to rental markets across the country
by providing speedier dispute resolution
mechanism framework and is expected to
give a fillip to private participation in rental
housing. Time bound and robust grievance
redressal mechanism comprising of Rent
Authority, Rent Court and Rent Tribunal to
provide fast-track resolution of disputes. MTA
seeks to provide the confidence to landlords
to rent out vacant premises with no fear of
not getting the premises back post tenancy
period and thus it will help in unlocking the
potential vacant stock. MTA will promote
vibrant, sustainable, inclusive & formal rental
market and also help in utilizing the potential
economic opportunities in rental segment.
States of Andhra Pradesh, Tamil Nadu, Uttar
Pradesh, Uttarakhand, Assam, Arunachal
Pradesh and UTs of Jammu & Kashmir,
Andaman & Nicobar Islands, Dadra & Nagar
Haveli and Daman & Diu and Lakshadweep
have enacted their State rental laws on lines
of MTA.
Reforming India’s rental housing framework
is, therefore, key to addressing urban
housing shortages and unlocking over 1
crore vacant homes. Modern rental laws
and implementation of the Model Tenancy
Act can build trust between landlords and
tenants, a reform which has to be introduced
to mobilise the rental markets. Further, to
support the mobile but financially stable
population, institutional models, like in
Singapore or the Netherlands, can be
introduced, where companies or not-for-
profits invest in rental housing.
To scale up affordable rental housing, States
should adopt dedicated rental housing
stock policies through Public–Private
Partnership (PPP) models, in lines PMAY-U
2.0 Affordable Rental Housing (ARH) vertical.
Under this approach, private sector may bid
for government-owned or acquired land,
construct affordable rental housing, and rent
it out while ensuring long-term maintenance.
Alternative models like BOOT, DBOFT, annuity,
hybrid etc. could be considered depending
on the context on a case-to-case basis.
In addition, private developers could be
incentivized to acquire land parcels and
build rental affordable houses for the poorest
sections of the society. Viability gap funding
has been explored as a potential option to
make it financially attractive for developers
to invest in affordable housing projects
Given substantial sunk funds in such projects,
the developers could be further incentivized
by offering long-term loans (say 20-40 years)
through development financing institutions
like NaBFID, NHB, HUDCO.
Several countries, including Austria and South
Korea, provide subsidised rental housing as
a critical component of their housing policy.
For example, in Vienna, Austria, net rents
are capped by law at €4.97 per sq. m, with
land prices limited to €188 per sq. m. Private
rental market rates, however, reach as high
as €7.5 per sq. m (excluding running costs),
creating an effective discount of 30–40%
in social housing. France provides 50 year
loans for affordable housing projects. Prêt
Locatif à Usage Social (PLUS) is a loan with
a maximum term of 40 years (or 50 years for
land purchases) with subsidy of 5-22% of cost.
Dwellings are subject to maximum rent levels
that differ between regions. These loans are
made available through deposits in Livret
personal savings Accounts (Special tax-free,
high interest rate, state guaranteed accounts).
This scheme has funded Euro 10 billion in
2019 for affordable housing
Way Ahead: Reforming Rental housing Ecosystem on lines of Model Tenancy Act and evolving
National Urban Rental Housing Policy. 36
5.2.5 Rationalization of municipal
service charges for affordable rental
housing provided by institutions/
companies
In many States, companies/institutions that
provide affordable housing units under
rentals are considered as commercial units
with higher municipal service charges like
electricity, water and property taxes payable
on such properties. On the other hand, any
rental housing maintained and operated by
individual owners face residential rates of
such charges. Similarly, rental agreements
made by companies face GST while properties
rented out by individuals do not face GST. This
has restricted the growth of such formal rental
affordable housing operated/maintained
by companies / institutions / developers,
wherein investments in lifecycle costs can
be contributed by a developer instead of
individual households.
In addition, individual tenements under
company-owned rental units, when operated
as paying guest (PG) accommodations,
co-living facilities, or service apartments,
are currently not treated as residential
tenements. At present, such units are often
billed at commercial utility tariffs for water,
electricity, and waste disposal, which raises
the cost burden on tenants and operators. To
encourage private participation in Affordable
Housing segment, such projects which are
falling under the category of Affordable
Housing should be treated as residential and
charged at residential tariff rates. Companies
such as OYO Life, Stanza Living, Zolostays,
and NestAway demonstrate the growing
scale of such co-living and managed rental
housing models in India. Extending rental
income incentives alongside residential
utility charges will help attract market driven
solutions while supporting a vibrant, inclusive,
and sustainable rental housing market for
Affordable Housing.
Affordable Rental housing units should be
considered as residential activity for the
purpose of levying of municipal charges and
GST irrespective of the fact who is operating.
It is the final use of such units that should
determine the taxes, fees and charges and
not the operator.
5.3 Access to capital
Affordable housing remains constrained not
only by the high cost of land and low supply
of units, but also by systemic weaknesses in
the financing ecosystem. Both households
and developers face barriers that make
affordable housing a high-risk, low-return
segment. To address these gaps, the following
interventions are recommended:
5.3.1 Incentivize affordable housing
projects by restoring section 80-IBA
To boost the affordable housing segment, it
is recommended to reintroduce provisions
under Section 80-IBA of the Income Tax
Act, which earlier allowed 100% income tax
exemption on profits and gains derived by
developers from the operation of approved
affordable housing projects (applicable from
June 2016 to March 2022). The revival of this
incentive will provide a strong fiscal push to
developers, improving project viability and
encouraging greater participation from the
private sector.
5.3.2 Tax incentives for affordable
housing REITs
A Real Estate Investment Trust (REIT) is a
company or trust that owns, operates, or
finances income-generating real estate. To
encourage affordable housing units to raise
funds through REIT and reduce the cost
of funds for affordable housing units, it is
proposed that rental and capital gain income
for investors from REITs whose underlying
assets are affordable housing projects should
be exempted from tax. Together, these
interventions can drive inclusive and market-
responsive housing growth. 37
5.3.3 Enhanced credit guarantee for
buyers
Many buyers of affordable housing units
are EWS and LIG individuals who often face
issues with access to formal credit from banks
due to low income and lack of education on
formal financing. Credit Risk Guarantee Fund
Scheme for Low Income Housing (CRGFTLIH)
provides guarantee cover for loans upto ₹ 20
lakhs. However, these guarantee cover should
be increased to ₹ 40 lakhs to sufficiently cover
sale of affordable housing units.
5.3.4 Lower interest rate through
tax free bonds
Capital cost is a major contributor to the
construction cost. Real estate developers face
high interest rates to the tune of 12-15% due to
perceived high risk involved in such projects.
Moreover, the affordable housing finance
sector still faces issues in availing finance
under Priority Sector Lending.
It is proposed that National Housing Bank
(NHB) should be allowed to issue tax free
bonds under Section 54EC of Income Tax
Act. The proceeds of these units should be
used for providing concessional funding
for Affordable Housing projects that build
affordable housing dwelling units targeted
at the EWS/LIG category of buyers.
5.3.5 Land use charge exemption
Different kinds of land use zoning in urban
areas restrict the usage of land for residential
areas. Moreover, the available land often
gets priority for luxury and middle-income
housing units over EWS and LIG segments.
Land use changes from agriculture or other
uses to residential uses require charges to
be paid to State authorities. This restricts the
conversion of available land into affordable
housing units.
Charges for change of land use should be
exempted with the condition that only
affordable housing units can be constructed
on such land, while utilizing at least 50% of
the permissible FAR.
To address this, Maharashtra and Haryana
have introduced their Affordable Housing
Policies under PMAY-U scheme, offering
land at concessional rates, fee exemptions,
and higher FAR/FSI for affordable projects
on government or converted land. Other
States should also adopt similar measures
to make land more accessible for affordable
housing and encourage greater private sector
participation.
5.3.6 Stamp duty and registration
charge exemption
Stamp duty and registration charges can
amount to 5-7% of the transaction cost of
the house. However, this makes the existing
houses unaffordable for low-income
categories.
Stamp duty and registration charges should
be exempted for all PMAY-U 2.0 houses
and other dwelling units which are part
of ‘Affordable Housing Projects’. This will
meaningfully reduce the price of lowest end
of affordable housing and make ‘Affordable
Housing’ more accessible to buyers and
attractive to builders.
Several States including Gujarat, Maharashtra,
Jharkhand, Madhya Pradesh, Uttar Pradesh,
Telangana etc have also eased the financial
burden on beneficiaries by reducing stamp
duty and registration charges for EWS
housing under PMAY-U, often charging only
a token amount between ₹1 and ₹1,000 for
houses up to 60 sq. m. This measure has
significantly improved affordability and
should be adopted widely across the country.
5.4 Other recommendations
Beyond the above reforms and
recommendations, the report underscores
the need for complementary measures
that strengthen the overall ecosystem for
affordable housing in India. These measures
aim to create an enabling environment by
addressing institutional capacities, improving
underwriting practice, and leveraging
technology to support large-scale delivery of NITI Aayog 38
housing for all.
5.4.1 Promoting ease of doing
business
To improve the supply of housing, a time
bound, and Single Window Clearance System
is essential for ensuring faster approvals of
projects by developers. At present, housing
projects are delayed due to the requirement
of multiple clearances from different
departments, leading to cost escalation
and reduced investor confidence. A single
window mechanism, preferably digital,
can integrate approvals related to land use,
environment, safety, and infrastructure
services, while setting strict timelines for
decision-making. This would not only reduce
bureaucratic delays and transaction costs
but also enhance transparency, improve
ease of doing business, and accelerate the
delivery of affordable housing projects,
thereby increasing overall supply. There is
also need to focus on streamlining processes,
improving transparency, and enabling faster,
accountable decision-making
5.4.2 Evidence-based planning -
tackling the data gap
A National Housing Data Grid should be
established to consolidate information
on stock, supply, rentals, and vacancy
rates, creating a reliable evidence base for
affordable housing planning. By leveraging
technologies such as AI, blockchain, and
geospatial analytics, this grid can function
as a decision-support system for land
reforms, demand-supply monitoring, and
evidence-based interventions. To strengthen
its foundation, the RERA Act should be
expanded to mandate systematic collection
and maintenance of housing data across
States. Building on this infrastructure, a digital
marketplace for affordable housing can be
developed, enabling transparent listing of
verified projects and improving access for low-
income households, while also streamlining
government subsidies and rental vouchers.
5.4.3 Capacity building
The Committee recommends that the
Ministry of Housing and Urban Affairs
(MoHUA) develop a Model Housing Policy to
serve as a guiding framework for states. The
policy should be designed with flexibility,
enabling states to adapt and adopt it in
line with their local contexts while ensuring
alignment with national priorities on
affordable housing. In parallel, MoHUA
should facilitate the systematic sharing of
best practices from states such as Haryana
and Maharashtra, where urban planning
reforms and affordable housing initiatives
have demonstrated tangible impact. Wider
dissemination of such models would not only
accelerate policy adoption but also reduce
fragmentation and enable more consistent,
effective implementation across the country.
5.4.4 Innovative underwriting
practice
A tailored credit product which has been
developed under the aegis of Indian Banks
Association (IBA) should be popularized for
the Economically Weaker Sections (EWS)
and Low-Income Groups (LIG), where access
to institutional finance remains weak. Cash
flow-based underwriting templates, suited to
informal income streams such as daily wages
or self-employment, can expand housing
finance access, reduce reliance on informal
lenders, and enhance creditworthiness for
vulnerable households. Also, design and
implementation of the alternate credit
information models, similar to Gramin Credit
Score announced in the Union Budget
2025-26, will help the lenders in better risk
assessment and enable the financing needs
in Affordable Housing sector.
5.4.5 Provision for O&M support
In order to address the issues relating to O&M,
it is recommended that in all Affordable
Housing projects, mixed-use development
be adopted, wherein the ground floor
(+1) is allowed for commercial use and
the upper floors for affordable housing.
Recommendation for higher FAR, as outlined
in the previous section 5.1.2, can also be APPROACH PAPER ON AFFORDABLE HOUSING 39
leveraged to enhance the financial viability
of such projects. Rental income generated
from the commercial spaces can then be
channelled towards the upkeep of housing
assets, thereby ensuring proper lifecycle
maintenance.
There are various States that have taken such
initiatives under PMAY-U. The Government
of Telangana has developed several multi-
storeyed housing projects that integrate
commercial spaces such as shopping
complexes/retail shops on the ground floor
of residential blocks in Hyderabad. These
commercial units are designed to generate
revenue, either through monthly rentals or
one-time sales, to create a maintenance
corpus for the housing colonies. The funds are
utilized to cover Operation and Maintenance
(O&M) expenses, including lift operations,
common area lighting, water supply pump
sets, and Sewerage Treatment Plants (STPs).
To ensure sustainability, Resident Welfare
Associations (RWAs) have been formed to
manage rent collection and oversee the
overall O&M activities of these housing
project.
Similar initiatives have been taken up by
the States of Madhya Pradesh, Maharashtra,
Gujarat amongst others.
Summary of Recommendations and Implementing Responsibilities
The following table summarises the recommendations of the Committee along with
the proposed instruments for operationalisation and the agencies responsible for their
implementation.
S.No. Recommendation
Instrument for
Operationalisation
Responsibility for
Action
1. Strategic interventions to increase land supply
1.1
Reserve ≥10%
residential land for
Affordable Housing in
Master Plans/TPS.
Inclusion in Master Plans
and URDPFI Guidelines.
MoHUA to include
provision in URDPFI
Guidelines; State
Governments to adopt.
1.2
Raise FAR to 5-6 and
ease parking/setback/
density norms for
affordable projects.
Update Model Building
Bye-laws and National
Building Code (NBC).
MoHUA/BIS to revise;
States/ULBs to adopt.
1.3(a)
Adopt land pooling
and PPP for peri-
urban growth with
spatial monitoring
tools.
Inclusion in URDPFI
Guidelines and adoption
by States.
MoHUA to include
provision in URDPFI
Guidelines; State
Government to adopt
(b)
Expand planner
urban areas through
monitoring LCRPGR
URDPFI metrics and State
GIS systems.
MoHUA to issue
guidance; States/UDAs
to monitor/report. 40
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
1.4
Reserve mixed-use
TOD precincts near
mass transit with
higher FAR (up to ~8),
relaxed parking, and
density norms.
Update TOD Policy,
Development Control
Regulations, and Building
Bye-laws.
MoHUA to update TOD
Policy and URDPFI
Guidelines; State
Governments/ULBs to
adopt.
1.5
Provision to allow
TDR from affordable
housing to be sold to
make them financially
viable
Update Value Capture
Policy and Model Building
Bye-laws.
MoHUA to revise Value
Capture Policy; State
Governments/ULBs to
adopt.
1.6
Digitally map all
vacant public & private
land; prioritise EWS/
LIG housing and tax
idle plots.
Inclusion in URDPFI
Guidelines; creation of
State-level land-banks
and fiscal disincentive
framework.
MoHUA to prepare
guiding framework; State
Governments/ Urban
Development Authorities
to implement.
2. Increase supply of affordable housing stocks
2.1
Develop rental units
near job hubs using
MoHUA models that
emphasise PPPs
and integration with
industrial plans.
Adopt MoHUA model
frameworks; include in
State Affordable Housing
Policies and industrial
area regulations.
MoHUA to review and
update policy; State
Governments/ULBs to
implement.
2.2
Mandate 10–15% EWS/
LIG housing in projects
exceeding 10,000 sqm
BUA or 5,000 sqm plot
area; where on-site
construction is not
feasible, permit off-
site delivery within 4
km, for projects >1,000
sqm to contribute to
Shelter Fund (~2× cost)
funded by 1.1–3% levy
and tradable credits.
Update Model Building
Bye-laws; notify new
Affordable Housing Policy.
MoHUA to prepare
guiding provisions; State
Governments to adopt
best practices 41
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
2.3
Create NHB/HUDCO-
anchored fund using
tax-free bonds, PSL
shortfalls and ECBs for
rental projects.
Establish fund vehicle(s);
enable tax/ECB provisions;
MoHUA/ DFS/NHB/
HUDCO to design; Dept.
of Revenue to amend
relevant Acts; States
Governments to notify.
2.4
Promote diverse rental
housing models and
rental reforms
Review and update
National Urban Rental
Housing Policy and Model
Tenancy Act.
MoHUA to examine and
update the National Urban
Rental Housing Policy
(2015)
MoHUA to review changes,
if any required in the Model
Tenancy Act.
States to adopt and
implement
2,5
Treat affordable rental
as residential use for
utilities, property tax
and GST
Revision of GST and
municipal tariff rules.
MoHUA to initiate; GST
Council and States to
implement.
3. Access to capital
3.1
Reintroduce 100%
profit exemption for
affordable housing
projects
Amendment to Income
Tax Act.
Department of Revenue.
3.2
Exempt rental and
capital gains income
for Affordable Housing
REITs.
Amendment to Income
Tax Act.
Department of Revenue.
3.3
Raise CRGFTLIH limit
from ₹20 lakh to ₹40
lakh for EWS/LIG
buyers.
Revision of CRGFTLIH
scheme.
MoHUA and NCGTC 42
4.1
Implement digital
time-bound
clearances for housing
projects.
Integration of clearance
systems and procedural
reforms.
MoHUA to coordinate
with States.
4.2
Create digital
database of stock,
supply, and vacancy
linked to RERA.
Amend RERA rules for data
and creation of National
Housing Data Grid.
MoHUA
4.3
Develop a Model
Housing Policy and
disseminate best
practices amongst states
Preparation and circulation
of Model Policy.
MoHUA.
4.4
Adopt IBA cash-
flow templates and
alternate credit scores
for informal incomes.
Collaboration with the
Indian Banks Association
and DFS.
DFS and MoHUA.
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
3.4
Allow NHB to issue
54EC tax-free bonds
for affordable housing
finance.
Section 54EC of Income
Tax Act; bond issuance by
NHB.
DFS to propose;
Department of Economic
Affairs to approve.
3.5
Land use charge
exemption for projects
having affordable
housing units
constructed on at least
50% of permissible FAR
Revision of municipal and
state charges
MoHUA to issue guidance;
State Governments to
adopt.
3.6
Exempt stamp duty
for PMAY-U 2.0 and
other affordable units
MoHUA guidelines and
State adoption.
MoHUA to guide; State
Governments to adopt.
4. Other recommendations 43
S.No.Recommendation
Instrument for
Operationalisation
Responsibility for
Action
4.5
Allow commercial
use (G+1) in affordable
housing projects to
fund maintenance.
Inclusion in Affordable
Housing Policy and Building
Bye-laws.
MoHUA.
5. Nudging the states
5.1
Reform linked
financial incentives.
Linking funding
not just to housing
outcomes, but also
to allocations under
flagship urban
schemes and Finance
Commission transfers.
Central financial support
linked to state level reform.
MoHUA and Department
of Economic Affairs NITI Aayog 44
To nudge states towards adopting various
reforms, the Committee recommends the
following reform-linked financial incentives
under various Urban Missions of MoHUA like
PMAY-Urban 2.0, Atal Mission for Rejuvenation
and Urban Transformation (AMRUT), Urban
Transport (Operationlising Metro Network),
PM e-Bus Sewa Scheme etc.
»
Incentives tied to reforms: Central
financial support should be directly linked
to state-level policy changes that promote
affordable housing.
»
Conditional disbursement: Release
of funds should be contingent upon
notification and implementation of key
policy reforms, ensuring accountability
and progress.
»
Comprehensive funding coverage:
Reform-linked incentives should extend
beyond housing to include allocations for
metro projects, MoHUA flagship schemes,
and Finance Commission transfers, thereby
creating a holistic funding ecosystem.
Beyond these specific programmatic
incentives, the Committee further
recommends establishing strong reform
linkages across all future schemes and
funding mechanisms, both direct and
indirect, that influence affordable housing
outcomes. This integrated approach will
ensure policy coherence, enhance fiscal
accountability, and create a sustained
ecosystem that incentivizes states to prioritize
and mainstream affordable housing within
the broader urban development agenda.
6. Nudging states through Reform-linked financial
incentives APPROACH PAPER ON AFFORDABLE HOUSING 45
7. Conclusion
Affordable housing in India stands at
the critical intersection of social welfare,
economic growth, and urban sustainability.
Despite significant policy momentum under
the Housing for All vision and efforts through
PMAY-U and PMAY-U2.0, the persistent
shortage of Affordable housing, particularly
EWS housing in urban areas underscores
the depth of the challenge. High land costs,
shrinking supply, weak rental frameworks,
and limited access to finance have combined
to widen the affordability gap, leaving
large sections of low- and middle-income
households excluded. Global lessons from
Singapore, Vienna, and Seoul show that large-
scale public housing, land-use reforms, and
innovative financing can create sustainable
housing ecosystems that balance affordability
with viability.
This report highlights that bridging India’s
affordability gap requires moving beyond
subsidies towards structural reforms.
Unlocking land supply, reforming building
norms, expanding rental housing, and
enabling developer and consumer financing
are central to this effort. By combining
targeted incentives with evidence-based
planning and state-level reforms, India
can create a robust, inclusive, and scalable
housing model-turning affordable housing
from a welfare imperative into a driver of
equitable economic development. 46
Annexure 1 47 48
Learnings from Global Best Practices
Many countries around the world have
successfully expanded affordable housing
supply through targeted public interventions,
supply side and demand-side measures. As
shown in Figure 2, Singapore has the highest
share of public housing at 75%, followed by
Hong Kong (50%), Vienna (46%), and London
(23%).
Singapore has developed about 11 lakh public
housing units, while Hong Kong has 8 lakh—
figures comparable to India’s ~8 lakh units
under PMAY in metro cities.
South Korea also undertook a massive
housing drive in the early 1990s, adding 2
million low-cost units and bringing nearly
6% of its population under public housing.
The results are striking: Vienna’s renters,
for example, pay only about a third of what
tenants in London, Paris, or Dublin spend for
similar homes.
These cases highlight how large-scale, state-
led housing provision can expand supply,
stabilize rents, and make urban housing more
affordable. The following section delves into
country-wise experiences to understand how
these models can inform India’s affordable
housing strategy.
Vienna (Austria)
Vienna has established one of the world’s
strongest affordable housing systems, where
nearly half of all residents live in public or
subsidised cooperative housing. This success
stems from deliberate state intervention
in both land and finance markets, ensuring
a continuous supply of affordable rental
units shielded from speculative pressures.
At the heart of this model, the city holds
about 3 million square metres of land
reserved exclusively for affordable housing
construction, primarily rental-based.
Land prices for such projects are capped,
and regulations stipulate that rentals
must be capped for at least 66% of the
Annexure 2 Singapore
% Public Housing
Figure 275
50
46
23
HongKong
Vienna
London 49
Singapore
Singapore’s public housing system is globally
recognised for its scale and inclusiveness,
with approximately 80% of residents living
in Housing and Development Board (HDB)
flats—providing homes for the vast majority of
citizens through systematic state-led delivery.
Home-ownership among these residents
is even more remarkable, exceeding 90%,
underscoring the effectiveness of structured,
affordable access to housing.
This success is anchored in integrated urban
and transport planning: HDB developments
are systematically located next to Mass
Rapid Transit (MRT) systems, job centres,
schools, and social infrastructure, facilitating
shorter commute times and high liveability.
The Urban Redevelopment Authority (URA)
units to guarantee long-term affordability.
This approach not only stabilises project
economics but also prevents windfall gains
from land speculation, ensuring that a
majority of units remain accessible to low-
and middle-income households over time.
Net rent is limited by law at Euro 4.97 per
square meter and land price limited to Euro
188 / sq.m.
The model is reinforced by subsidised capital.
Housing associations and limited-profit
developers can access public loans at interest
rates as low as 1%, covering a significant share
of construction costs. These loans, coupled
with modest tenant contributions and
mandatory reinvestment of surpluses, enable
a cost-rent framework where rents reflect
actual costs rather than market fluctuations.
The result is a resilient and inclusive housing
ecosystem: about 50% of Vienna’s population
currently resides in public or cooperative
housing, benefiting from rents well below
private market levels. By combining land
reserves, capped pricing with a 66% rental
requirement, and subsidised long-term
finance, Vienna demonstrates how sustained
policy design can embed affordability at the
core of urban development.
George-Washington-Hof, one of Vienna’s landmark public housing estates, represents the
city’s large-scale affordable housing model.
Source: Housing4.us (2020) 50
works closely with HDB to align land use and
transport planning.
Singapore’s affordability is further grounded
in a robust capital subsidy framework.
The state provides HDB developments
with land at below-market costs, while
households receive significant financial
support through the Central Provident
Fund (CPF) housing grants. In addition,
HDB provides concessionary housing loans
pegged at 2.6%, just 0.1 percentage point
above the CPF Ordinary Account savings rate,
making financing far more affordable than
commercial mortgages.
The cumulative outcome is transformative.
HDB estates now form the backbone of
Singapore’s urban identity, delivering
secure, high-quality, and affordable
homes at scale while fostering urban
cohesion, social integration, and widespread
homeownership. Through deliberate public
delivery, integrated planning, and targeted
financing support, Singapore demonstrates
how housing affordability can be embedded
within broader socio-economic strategies.
City Vue @ Henderson, a Housing and Development Board (HDB) public housing project in
Singapore, was completed in 2019. It illustrates high-density affordable housing integrated
with community facilities and green spaces.
Source: Bloomberg (2020)
South Korea
South Korea’s public housing system offers
a mix of short-term leases (10–30 years) and
permanent rental units, ensuring options
for different income groups. Categories such
as permanent rentals, national rentals, and
temporary leases were introduced to widen
tenure choices, while programmes like the
Happy Housing scheme target young adults
and students with rents set at 60–80% of
market rates. 51
London, UK
London’s affordable housing strategy
is anchored in the Affordable Homes
Programme (AHP) 2021–2026, which is
funded by the UK government and delivered
by Homes England and the Greater London
Authority (GLA). Nationally, the programme
To accelerate supply, the Housing
Construction Acceleration Act enabled
higher-density housing with floor-area ratios
up to 300% and buildings above five storeys.
This was supported by subsidised land
allocations and low-interest government
loans administered through institutions
such as the Korea Land and Housing
Corporation (KLHC). By reducing financing
costs and providing capital injections, these
measures encouraged developers to expand
construction of affordable rental housing at
scale.
In the early 1990s, a national housing drive
constructed over 2 million homes, creating
a significant expansion in affordable supply.
As of recent data, around 1.74 million public
rental units exist nationwide, covering nearly
6% of the population, primarily concentrated
in large metropolitan areas like Seoul.
The system is further reinforced by national
programmes such as the National Public
Rental Housing Program and targeted
initiatives like Happy House, which provide
subsidised housing below market levels for
younger households and those with moderate
incomes. The outcome has been a substantial
increase in affordable rental housing, with
diversified tenure options and price stability
that demonstrate how large-scale state-led
interventions can effectively address housing
needs during rapid urbanisation.
Housing units in Seoul, viewed from N Seoul Tower (file photo, July 14, 2025). Seoul alone
accounts for approximately 210,000 units of public lease housing, about 6.1% of its total stock.
Source: Yonhap / The Korea Herald (2025). 52
provides £11.5 billion to deliver up to 180,000
new affordable homes by March 2026.
To speed up approvals and boost delivery,
London employs the “Fast Track Route”:
developments on private land providing at
least 35% affordable housing, or 50% on
public/industrial land, can bypass detailed
viability assessments.
Capital-side support is also core. Through
AHP, the government provides capital grants
and subsidised land to local authorities
and housing associations, conditioned on
delivering affordability—typically ensuring at
least 50% of units are affordable, including
social rent, London Affordable Rent, London
Living Rent, and shared ownership
The South Kilburn Regeneration Programme, led by Brent Council, is transforming a
40-hectare estate in Zone 2 London into a sustainable, inclusive neighbourhood. Over
1,500 new homes—many affordable—have already been delivered, alongside parks, schools,
health facilities, and public realm improvements.
Source: Brent Council / nla.london
Germany
Germany’s housing affordability system
rests on a dual support framework: direct
subsidies to households through Wohngeld
(housing allowance) and subsidised capital
programmes administered by the state
development bank KfW (Kreditanstalt für
Wiederaufbau).
Wohngeld is a rent and housing cost
allowance paid directly to low-income
tenants and homeowners to bridge the
affordability gap. It is co-financed by the
federal and state governments and helps
households whose income is insufficient
to cover housing costs. Following reforms
in 2020 and 2023, eligibility was expanded,
and benefit amounts increased to reflect
rising rents and energy costs. In 2022, around
600,000 households received Wohngeld,
with federal and state governments allocating
over €1.6 billion annually to the scheme.
On the capital side, KfW housing
programmes provide highly subsidised 53
loans for home construction, purchase, and
retrofitting. Interest rates are often in the 1–3%
range, compared to market rates of 4–5%.
Programmes such as KfW Home Ownership
and Energy-Efficient Construction and
Refurbishment have channelled more than
€20 billion annually, supporting millions of
households. In 2021 alone, KfW committed
€35 billion in promotional funds for housing
and energy-efficient construction, benefitting
about 4.5 million households over the past
decade.
This dual system—Wohngeld as a
consumption subsidy and KfW as a
capital subsidy—ensures that affordability
measures support both renters and aspiring
homeowners. By directly supplementing
household budgets while also lowering
borrowing costs for construction and retrofits,
Germany has embedded affordability within
a framework that also advances energy
efficiency and long-term sustainability.
France
France’s housing affordability framework
combines a direct subsidy to households via
the Aide Personnalisée au Logement (APL)
and a subsidised loan mechanism for home
buyers through the Prêt à Taux Zéro (PTZ).
APL is a means-tested housing allowance paid
directly to tenants or homeowners via a fully
digital system managed by CAF. Applications
are typically processed within two months,
with the allowance paid retroactively from
the month following application submission.
The digitalisation of the process has helped
ease access and accelerate disbursement for
low-income households.
kisches Viertel, Berlin—one of Germany’s largest social housing estates, recently modernised
through KfW-supported energy-efficient refurbishments to maintain affordability.
Source: GESOBAU AG / Urban Sustainability Exchange 54
The PTZ is an interest-free home-purchase
loan targeted at first-time buyers. It covers
up to 50% of the purchase cost for new
apartments, with eligibility assessed by
income and property location. Recent
reforms, effective April 2025, have expanded
PTZ access nationwide—now including
detached houses and older units requiring
renovation—thereby broadening affordability
support to more households.
In terms of impact, APL and the PTZ together
support around 6 million recipients,
amounting to nearly 9% of France’s
population benefiting from housing
affordability interventions through direct
allowances or reduced financing costs.
United States
The United States addresses housing
affordability primarily through the Housing
Choice Voucher Program (often known as
Section 8). This federal initiative assists over
2.3 million low-income families by paying
a portion of their rent directly to landlords
with the tenant pays paying upto 30 per
cent of their income as rent. The average
annual subsidy is approximately $9,400 per
household.
On the finance side, the U.S. government
greatly supports housing through federal
mortgage guarantees and tax incentives.
The mortgage interest deduction allows
homeowners to deduct interest paid on
home loans from taxable income, further
subsidizing affordable homeownership.
Together, these mechanisms constitute a
dual-tiered affordability model: the Housing
Choice Voucher Program delivers direct rental
assistance, while the government-backed
finance and tax incentives make mortgage
borrowing more accessible, reducing housing
cost burdens for homeowners.
Public Housing project by Jakob + MacFarlane Architects in Paris, delivering affordable
housing units within the ZAC Masséna–Bruneseau redevelopment. It reflects France’s shift
toward design-led, sustainable, and socially inclusive housing.
Source: The Architectural Review 55
Via Verde, Bronx, New York—an award-winning affordable housing development with 222
units. The project integrates rental and cooperative homes with green roofs, community
gardens, and sustainable design features.
Source: Dattner Architects. Key Contributors
From Ministry of Finance
◆Ms. Neelam Agrawal, Director, Department of Financial Services
From Ministry of Housing and Urban Affairs
◆Mr. Vaibhav Rundawal, Deputy Secretary
From National Institution for Transforming India
(NITI) Aayog
◆Shri. Arunava Dey, Research Officer (MU)
◆Shri. Kaustubh Srivastava, Consultant Grade -I (MU)
◆Shri Akshat Thakore, Consultant Grade -I (MU)
From Foundation for Economic Development
◆Mr. Mohit Gupta, Program Lead
Other Experts
◆Debarpita Roy, Visiting Fellow – Urbanisation at Centre for Social and
Economic Progress 58
A COMPREHENSIVE
FRAMEWORK TO PROMOTE
AFFORDABLE HOUSING 59