Affordable housing norms may see overhaul, says Housing minister Manohar Lal Khattar

Union Housing and Urban Development Minister Manohar Lal Khattar has indicated that India's affordable housing norms may undergo significant changes. Speaking at the NAREDCO National Convention, Khattar emphasised that the definition of affordable housing could be revised to better align with current market dynamics. With a sharp decline in the share of affordable housing, falling from 52.4% in 2018 to 17% by mid-2025, the need for reform is pressing.

The proposed changes aim to redefine affordable housing by considering the valuation of land where the project is developed. This approach could allow for varying price limits depending on the project location. Currently, affordable housing in India is defined by specific price caps and carpet area limits, with properties priced up to ₹45 lakh considered affordable. Khattar stated that discussions with urban development ministers of all states will be initiated to explore these proposals.

Affordable housing has long been a cornerstone of India’s urban development agenda, given its role in ensuring that households with incomes at or below the median can access decent housing without spending more than 30% of their income on it. Schemes like the Pradhan Mantri Awas Yojana (PMAY) have provided critical support through interest subsidies on home loans, while state-specific policies such as Haryana’s HUDA Affordable Housing Policy have leveraged public–private partnerships to deliver lower-cost homes.

Despite these efforts, the sector is under growing stress. India faces an affordable housing shortfall of 9.4 million units, a gap projected to rise to 30 million by 2030. A Knight Frank report presented at the convention highlighted that while demand continues to rise, new supply has slowed sharply. The supply-to-demand ratio for affordable housing has fallen from 1.05 in 2019 to just 0.36 in the first half of 2025 across the top eight cities—Mumbai, Delhi NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad.

The report also noted a steep drop in the share of affordable housing launches. In 2018, homes priced below ₹50 lakh accounted for more than half (52.4%) of the new supply. By mid-2025, that share had collapsed to just 17%. High land costs, lack of construction finance, and infrastructure bottlenecks in peripheral areas have made it difficult for private developers to sustain affordable housing projects, despite steady demand.

Experts argue that bold supply-side reforms are now essential. Recommendations include unlocking idle PSU land through public–private partnerships, rationalising floor space index (FSI) norms to reduce costs, and providing subsidised construction finance to developers. Without these interventions, the mismatch between demand and supply is expected to widen further.

“Affordable housing is not only a social priority but also an economic necessity,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India. “While demand-side policies like PMAY have been commendable, the real challenge lies on the supply side. Unlocking land, improving financing, and faster approvals will be key to bridging the gap.”

Despite the ambitious goals of schemes like the Pradhan Mantri Awas Yojana (PMAY) and various state-level initiatives, developers face constraints, including high land costs and limited financing options. The report suggests measures such as repurposing idle PSU land through public-private partnerships and rationalising floor space index (FSI) norms to enhance supply while cutting costs.

To mitigate the widening deficit, the report recommends extending subsidised construction finance to developers. This measure, along with planned regulatory changes, could stimulate private investment and foster a more robust supply of affordable housing.