Unlocking India's Housing Market: NITI Aayog's Bold Reforms to Tackle Land Costs

Land scarcity and soaring land prices are emerging as the biggest roadblocks to scaling up housing in India. NITI Aayog member Rajiv Gauba has called for sweeping structural reforms to bring costs down and supply up.

Addressing an international conference organized by the National Housing Bank, Gauba underscored that land alone accounts for 50–70% of total project costs—a far higher share than in comparable infrastructure sectors—making housing projects financially challenging, especially in the affordable segment.

To ease the pressure, he proposed a set of systemic fixes: earmarking at least 10% of residential land in master plans for affordable housing, increasing permissible Floor Area Ratios (FAR) to 5–6 from the current 2–3, promoting transit-oriented development, and adopting land pooling models. Such measures, he said, could significantly reduce land costs while unlocking new supply.

Financing constraints are compounding the challenge. Limited access to formal credit forces developers to rely on high-cost funding, undermining project viability. Margins are particularly thin in the economically weaker and low-income housing segments, making them unattractive for private investors.

Gauba also flagged a structural paradox: nearly 1 crore homes lie vacant nationwide, highlighting inefficiencies in allocation and utilisation. Strengthening the rental housing ecosystem, reforming tenancy laws, rationalising municipal charges, promoting diverse rental models, and creating anchor funds and dedicated financing channels could help crowd in private capital, he said.

Improving viability may require fiscal incentives as well, including profit exemptions for affordable housing projects, higher credit-guarantee limits for low-income housing, waiving profit fees on land earmarked for affordable units, and reducing or eliminating stamp duty on such homes.

He noted that NITI Aayog has been working closely with the Ministries of Housing and Urban Affairs and Finance, along with other stakeholders, to develop recommendations grounded in global best practices and evidence-based analysis, urging authorities to consider implementing them.

On the policy front, Department of Financial Services Secretary M. Nagaraju said the government has sanctioned 3 crore additional houses under the PMAY scheme—2 crore in rural areas and 1 crore in cities—taking the total to about 7 crore homes by 2029. So far, nearly 4 crore houses have already been completed under the flagship programme.

Through the Affordable Housing Fund, the National Housing Bank has disbursed ₹60,000 crore in concessional refinance till December 2025, supporting 5.85 lakh housing units. Nagaraju added that recent policy steps by the government and the Reserve Bank of India—including expanded priority-sector lending norms, higher loan limits, and broader eligibility definitions—are designed to channel more credit into underserved segments.

He also pointed to GST rate cuts on key construction materials as another lever expected to improve affordability and stimulate housing demand, signalling that policy momentum is building to ease India’s housing crunch if structural bottlenecks—especially land—are addressed.