India has significant progress to make in the housing sector. With every passing month, the dream of providing a home for every family in the country risks remaining just that – a dream. In 2014, when Prime Minister Narendra Modi launched the Prime Minister Awas Yojana (PMAY) in 2015, it was declared that two crore affordable houses would be built by 2022. The scheme was later extended, and funds for 1.18 crore houses were sanctioned.
PMAY-2, launched in 2024, aimed to provide finance for the construction of an additional one crore houses, taking the total to three crores. This was intended to address the shortage of nearly one crore houses. However, a recent report by CII-Knight Frank estimates that the housing shortage is likely to increase to three crores by 2030.
While PMAY has undoubtedly made commendable strides in addressing housing problems, much more needs to be done by both the Union and state governments. This responsibility lies more with the states than the Centre, as land – along with rights above and below it – is clearly a state subject under the Constitution. The Seventh Schedule grants states the authority over agricultural land alienation, colonisation, landlord-tenant relationships, rent collection, and land transfers.
The challenges in the housing sector are well-documented: rapid urbanisation, the proliferation of slums, escalating land prices, rising costs of construction materials, and the strain on existing civic amenities such as water supply, power, and roads. On the supply side, these issues are compounded by the private sector’s reluctance to engage in affordable housing projects, which yield far lower profits compared to luxury housing for affluent buyers.
On the demand side, access to finance remains the most significant hurdle, particularly for the economically weaker sections and the middle class. The Centre can only facilitate access to loans and subsidies, subject to certain eligibility criteria. States also provide additional concessions.
However, for the aspiring middle class – including salaried and unsalaried workers and small business owners without a regular income – the problem is even more pronounced. Although incomes are rising, they are not keeping pace with housing prices, leaving many without a home of their own.
This group cannot live in slums, and if they desire a proper house, they must move further and further away from their workplaces. Making a down payment of 10-20 per cent – often amounting to R10–20 lakh for housing priced between R50-70 lakh – is a considerable challenge.
Building houses for rent presents a potential solution. Instead of relying solely on state housing boards, state governments should identify land parcels in urban areas. Many PSUs, CPSUs, and state public sector units possess extensive land banks.
Large contractors such as L&T could be invited to bid for constructing no-frills mini-townships, involving nearby factory owners in the process. Municipal corporations, which benefit from increased tax revenues due to new industrial plants in their jurisdictions, could also contribute to funding these projects.
Project management consultants, NBFCs, and central PSU Navratnas with expertise in constructing townships and commercial units could be engaged. These organisations could buy or lease land from PSUs and facilitate the transparent sale of flats, with priority being given to employees working in the same district.
For example, land in Talegaon near Pune could serve employees in Chakan, an automobile and industrial manufacturing hub about 20 km away. Similarly, in new industrial corridors across the country, townships with rental apartments could be established.
Various types of accommodation, ranging from 30 m² to 100 m², could be built, with rents collected directly from industries that use the flats for their employees. The Centre, state governments, municipal corporations, and manufacturing units could jointly fund these projects.
Additionally, limits on TDR (Transferable Development Rights) and FAR (Floor Area Ratio) need to be relaxed to allow vertical growth of affordable housing in cities. Development Control Regulations should be revised to ensure orderly township growth.
Archaic rent acts must be abolished, and the Model Tenancy Act should be adopted by all states – not just Andhra Pradesh, Tamil Nadu, Uttar Pradesh, and Assam, which have done so thus far. In areas like Mumbai, redevelopment projects should be undertaken in a phased and transparent manner to facilitate the construction of affordable housing.
Building rental townships is undoubtedly a large-scale initiative, but the government could make a significant impact by pursuing such projects. This approach has the potential to be a game changer in alleviating India’s housing problem.