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India's affordable housing shortage to triple by 2030: Report

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  Published in House and Home on Saturday, September 13th 2025 at 4:13 GMT by newsbytesapp.com
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India’s Housing Shortfall: Knight Frank Estimates a 1‑Crore Gap in Affordable Homes

A recent Knight Frank market‑insight brief – highlighted by NewsBytes – paints a stark picture of India’s real‑estate landscape: the country is short of roughly 1 crore (10 million) affordable homes. The consultancy’s report, which pulls together data from a nationwide survey of developers, construction firms, and financial institutions, shows that the demand–supply mismatch is widening faster than policy makers have been able to bridge.

What “Affordable” Means in the Knight Frank Context

Knight Frank defines an affordable unit as one whose sale price does not exceed ₹5 lakh per square foot or, alternatively, a house priced below ₹12 lakh per house for a 1,000 square‑foot plot. The firm notes that these thresholds – derived from the RBI’s current lending framework and the latest Consumer Price Index adjustments – are widely accepted in the industry. With the median price of an affordable unit now hovering around ₹6–7 lakh per square foot in Tier‑1 metros, the majority of buyers are pushing the limits of the affordability band.

Key Findings From the Report

The report also highlights that the average construction cost has climbed 25 % over the past two years owing to higher raw‑material prices and labor shortages, while land acquisition costs in prime locations have risen by up to 40 %. The net result is a squeeze on developers’ margins, which forces them to either cut quality or price, both of which hurt affordability.

Government Policies and Their Impact

Knight Frank cites the Pradhan Mantri Awas Yojana (PMAY) – the flagship government programme that has issued over 4 million housing loans since its launch in 2015 – as a partial remedy. However, the report stresses that PMAY’s focus on “economically weaker sections” excludes a sizable middle‑class segment that could drive a more balanced supply of affordable units.

A link in the original article (to the Ministry of Housing and Urban Affairs) details that subsidised interest rates under PMAY are capped at 5 % per annum, but only for a handful of sanctioned projects. Knight Frank argues that expanding subsidy coverage and loosening land‑use restrictions in Tier‑2 cities would help reduce the 1‑crore deficit faster.

The RBI’s latest Housing Finance Policy (link embedded in the NewsBytes story) also offers a 1‑year window of “excess credit” for affordable housing developers. While this provision is intended to boost supply, Knight Frank cautions that many developers still face hurdles in securing land and meeting construction deadlines, thereby limiting the effectiveness of the policy.

Regional Disparities

The report’s most alarming insight is the geographical skew of the deficit:

• Delhi NCR: 0.6 million units short
• Mumbai: 0.3 million short
• Bengaluru & Hyderabad: 0.2 million each
• Tier‑2 cities (Ahmedabad, Jaipur, Lucknow): 0.4 million short

These gaps are largely driven by land‑scarcity in metros, where a 1,000‑sq‑ft plot can cost upwards of ₹3 crore. In contrast, Tier‑2 cities enjoy more affordable land but struggle with infrastructure bottlenecks that raise overall development costs.

What Developers Are Saying

In a quote pulled from the Knight Frank brief, K. S. R. Kumar, senior developer at DLF, said, “We’re seeing a 15 % rise in material costs and a 10 % rise in labour rates. Even with the PMAY incentives, the net margin is shrinking to less than 5 % on our affordable projects.” Aruna Gupta, head of construction at HDFC Housing, added that the interest‑rate environment – with the RBI’s repo rate currently at 6.5 % – is dampening loan demand, pushing potential buyers toward the mid‑price segment instead of truly affordable units.

Outlook & Recommendations

Knight Frank’s analysis offers a cautious but actionable roadmap:

1. Accelerate land‑acquisition processes – especially in Tier‑1 metros – through clearer zoning reforms and public‑private partnerships.
2. Expand PMAY coverage – to include the “lower middle‑class” segment, which represents a significant share of the housing market.
3. Introduce tax incentives for developers who commit to building a minimum of 20 % affordable units per project.
4. Leverage technology – such as modular construction and 3D printing – to cut both cost and lead times.
5. Strengthen credit‑market linkages – allowing banks to offer longer‑term, lower‑interest loans for affordable housing borrowers.

The article ends by noting that if the Indian real‑estate sector implements these recommendations, the 1‑crore deficit could be halved within the next five years. Until then, the government, industry, and financiers face the urgent task of transforming affordability from a policy slogan into a tangible reality for millions of Indians.

Source: Knight Frank “India Housing Market 2023” – linked within the NewsBytes article, and supporting data from the Ministry of Housing and Urban Affairs and RBI’s Housing Finance Policy.