Top 8 cities grapple with severe undersupply of affordable houses: Report

Demand for affordable housing projected to reach 30 mn units by 2030

India’s top eight cities are reeling under severe undersupply of affordable houses -- units that fall under ₹ 50 lakh category -- as the supply-to-demand ratio for affordable housing has dipped sharply to 0.36 in the first half of 2025, from 1.05 in 2019, a report by Knight Frank India and the National Real Estate Development Council (Naredco) said.

 

As of June 2025, the share of affordable housing stood at just 17 per cent, down steeply from 52.4 per cent in 2018.

 

The country’s current urban affordable housing shortage is pegged at 9.4 million units, with demand set to rise rapidly with the accelerating urbanisation.

 

By 2030, cumulative demand from economically weaker sections (EWS), lower-income group (LIG), and middle-income group (MIG) households is projected to touch 30 million units.

 

This marks a reversal from earlier years when developers launched more affordable units than were sold, supported by schemes such as the Pradhan Mantri Awas Yojana (PMAY).

 

In contrast, data for 2025 show new launches have fallen to barely one-third of sales, underscoring a widening imbalance that threatens affordability and limits buyer choice.

 

The decline is largely attributed to bottlenecks deterring private sector participation.

 

Between 2011 and 2024, private equity inflows into affordable housing totalled USD 1.9 billion, or only 7.8 per cent of residential sector investments. Foreign funds accounted for just 10.2 per cent of inflows into the segment between 2019 and 2024, the report noted.

 

“High land costs, inadequate institutional investment, and infrastructure deficits in peripheral locations continue to restrict developer participation. Without targeted incentives and financing mechanisms, affordable housing will remain underserved. Addressing these gaps can unlock private investment and create a sustainable ecosystem for the segment,” said Gulam Zia, senior executive director, advisory, valuation, and research, Knight Frank India.

 

Over the past decade, policy interventions such as PMAY, Affordable Rental Housing Complexes (ARHCs), and tax benefits have supported homebuyers by improving affordability and expanding credit access for EWS and LIG households.

 

However, the report cautions that supply continues to lag demand as developers grapple with rising land costs, limited construction finance, regulatory delays, and weak infrastructure in peripheral urban areas.

 

Unlocking public sector land, rationalising floor space index norms, and enabling subsidised construction finance could help revive private participation and restore affordability, said G Hari Babu, president, Naredco.