India's Affordable Housing Crisis: Supply Plummets to 0.36 for Every Unit Sold
A recent report by Knight Frank India and NAREDCO highlights the widening gap in India's affordable housing sector, with the supply-to-demand ratio dropping to 0.36 in 2025, down from 1.05 in 2019.
Affordable HousingReal EstateUrban DevelopmentPolicy ReformsPrivate InvestmentReal EstateAug 29, 2025
Over the past decade, policy interventions such as PMAY, Affordable Rental Housing Complexes (ARHCs), and tax benefits have provided critical support to homebuyers. These measures improved affordability and expanded access to credit for economically weaker sections and low-income groups. However, the report finds that supply continues to lag demand as developers face mounting challenges including high land costs, limited access to construction finance, regulatory delays, and inadequate infrastructure in peripheral urban zones.
Shishir Baijal, chairman and managing director of Knight Frank India, said, “Affordable housing is not only a social priority but also an economic necessity. As India urbanizes rapidly, the imbalance between supply and demand in this segment poses significant risks to inclusive growth. While policy support on the demand side has been commendable, there is a pressing need to address supply-side barriers. Encouraging private sector participation through innovative financing, faster approvals, and land availability will be critical to bridging the gap and ensuring that every Indian has access to dignified housing.”
India’s existing affordable urban housing shortage is estimated at 9.4 million units, with demand expected to rise sharply as urbanization accelerates. By 2030, cumulative affordable housing demand (including EWS, LIG, and MIG households) is projected to reach 30 million units. The ratio highlights a dramatic collapse in new launches, falling to nearly a third of sales in 2025. This shortfall, combined with incremental affordable housing demand of 20.7 million units by 2030, will push total affordable housing needs to 30 million units, of which 79% will be concentrated in EWS and LIG households.
The report points to a sharp imbalance between sales and launches. India’s affordable housing sector faces persistent challenges in expanding supply to keep pace with the country’s fast-growing urban population. Although policy initiatives like the Pradhan Mantri Awas Yojana (PMAY), Affordable Rental Housing Complexes (ARHCs) have laid the groundwork, the actual construction and delivery of affordable homes remain far from adequate. In 2025 (Until June), the share of affordable housing, i.e., value of housing units priced under INR 5 million stood at 17%, a sharp decline from 52.4% in 2018. Thus, indicating a decline in affordable housing supply in Indian cities. The receding number of launches in the affordable housing units is primarily attributed to the bottlenecks hindering private participation.
Another key finding of the report is the limited private capital flowing into the sector. Between 2011 and 2024, private equity inflows into affordable housing totalled USD 1.9 billion, accounting for just 7.8% of the residential sector. Foreign funds accounted for merely 10.2% of the capital inflow into the affordable housing segment between 2019-24. Gulam Zia, senior executive director– Advisory, Valuation, and Research, Knight Frank India, said, “The sharp decline in the new supply-to-demand ratio from 1.05 in 2019 to 0.36 in 2025 demonstrates the urgent need for structural reforms. High land costs, inadequate institutional investments, 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.”
G Hari Babu, president of NAREDCO, said, “At the 17th NAREDCO National Convention, the Knight Frank & NAREDco report has once again underlined the scale of India’s affordable housing challenge—a deficit of 9.4 million units that could rise to 30 million by 2030. The fact that new supply in this segment has dropped sharply while demand continues to grow is a matter of concern. Limited private investment further widens the gap. This Convention is the right platform to call for bold supply-side reforms—unlocking PSU land for housing, rationalising FSI norms, and enabling subsidised construction finance. These measures can restore affordability, attract private participation, and ensure that affordable housing becomes the real engine of inclusive urban growth in India.”
The report emphasises that unlocking affordable housing supply will require bold reforms and collaborative efforts among government, developers, financial institutions, and civil society. It recommends repurposing vacant PSU lands for affordable housing through public-private partnerships, increasing the free floor space index (FSI) to boost supply and reduce costs, and providing subsidized construction finance to developers, drawing on successful global models from project viability and attract greater institutional capital. Together, these measures can create an enabling ecosystem where private participation becomes financially feasible, ensuring that affordable housing supply not only meets the growing demand but also supports India’s long-term vision of inclusive and sustainable urban development.
India’s affordable housing challenge is not insurmountable. With policy alignment, innovative financing, and greater private participation, the sector has the potential to not only meet housing demand but also create more equitable, resilient, and inclusive cities.
Frequently Asked Questions
What is the current supply-to-demand ratio for affordable housing in India?
The current supply-to-demand ratio for affordable housing in India is 0.36, down from 1.05 in 2019.
What are the main challenges faced by developers in the affordable housing sector?
Developers face challenges such as high land costs, limited access to construction finance, regulatory delays, and inadequate infrastructure in peripheral urban zones.
What are the projected affordable housing needs by 2030?
By 2030, the cumulative affordable housing demand is projected to reach 30 million units, with 79% of the demand concentrated in EWS and LIG households.
What policy initiatives have been introduced to support affordable housing?
Policy initiatives include the Pradhan Mantri Awas Yojana (PMAY), Affordable Rental Housing Complexes (ARHCs), and tax benefits to improve affordability and expand access to credit for economically weaker sections and low-income groups.
What measures are recommended to boost private investment in affordable housing?
The report recommends repurposing vacant PSU lands for affordable housing, increasing the free floor space index (FSI), and providing subsidized construction finance to developers.
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