Developers seek higher FAR, flexible norms to boost Delhi rental housing

With the economics of affordable rental housing remaining challenging due to razor-thin margins, development incentives are critical to attracting private capital at scale

Developers may seek a higher floor area ratio (FAR) and lower development charges to make affordable rental housing financially viable under the new Master Plan for Delhi (MPD) 2047, even as the sector views land pooling as a key route to unlocking large parcels for private development.

 

With the economics of affordable rental housing remaining challenging due to razor-thin margins, realtors and industry bodies told Business Standard that development incentives are critical to attracting private capital at scale.

 

“Lower development charges, faster approvals, and flexibility in development norms can help,” said Harsh Vardhan Bansal, president of the Delhi chapter of the National Real Estate Development Council.

 

He added that incentives should enable developers to build rental housing at scale while ensuring that the benefit is ultimately passed on to tenants through affordable rents.

 

The MPD framework seeks to encourage private-sector participation in rental housing, including through additional development potential and provisions for affordable rental and other non-ownership housing formats.

 

The policy document states that typologies such as hostels, dormitories and worker housing shall be promoted to provide better housing access to students, labourers, and working men and women.

 

The new framework proposes a 50 per cent extra FAR bonus, waives land-use conversion and infrastructure fees, and permits 10 per cent commercial space for cross-subsidisation to encourage private participation in rental housing.

 

Developers, however, add that the incentive package would need to go beyond development rights. “Provision of infrastructural facilities, tax incentives, and liberal development rules may motivate developers to participate in such projects,” said Ravikant, cofounder of realty consultancy firm Elegance Enterprises.

 

The push for private participation in rental housing comes alongside a broader attempt to bring large parcels of land into planned development through land pooling.

 

Under MPD 2047, a land pooling policy (LPP) has been cleared to cover nearly 200 square kilometres of planned urban expansion and create around 1.2 million new homes.

 

Similarly, individual builders or aggregated groups holding at least 20 hectares can now bypass community consortium requirements and approach the Delhi Development Authority (DDA) directly to initiate construction.

 

While the LPP is expected to help overcome the fragmented nature of land ownership in Delhi, developers remain cautious due to the sheer number of contentious land titles, irregularities in records and lagging development timelines.

 

“Fragmented ownership and contentious holdouts often delay land acquisition and create prolonged legal disputes. Severe flaws in land records, inaccurate surveys, and unclear boundaries further complicate title verification and project planning,” said Vineet Kanwar, vice-president of realty industry body Credai NCR.

 

He added that the burden on developers is further intensified by double taxation and repeated stamp duty obligations, which increase transaction costs and reduce project viability.

 

The policy could reduce developers’ upfront capital requirements by allowing them to partner directly with landowners. Higher FAR in some areas might even support higher-density development. “However, infrastructure timelines frequently lag behind development schedules, leaving projects without adequate roads, drainage, electricity or public transport,” Kanwar observed.

 

Even as LPP aims to provide scale for private housing projects by bringing fragmented land parcels together for planned development, implementation could determine whether the policy succeeds.

 

“Single-window clearances, digitised land records, defined timelines, and better institutional coordination can help overcome these obstacles considerably,” Ravikant said.

 

Kanwar said the policy’s success would also depend on improving land records and ensuring that infrastructure delivery keeps pace with construction. “This could include drone-based mapping and a road-first approach to infrastructure as measures that could improve implementation,” he added.

 

Pradeep Kumar Aggarwal, founder and chairman of Gurugram-based Signature Global, added that proper implementation could significantly increase the organised housing supply in the city, bringing it closer to the scale and quality of development seen in major markets such as Gurugram, Noida, and Mumbai.