Redefining strategies for India's affordable housing challenges

In India's dynamic housing market, the challenge of affordability for lower-income groups remains a critical issue. Despite a government benchmark established in 2008, which defines housing as affordable if monthly payments do not exceed 30% of a household's gross income, this standard struggles to fully capture the reality of affordability in the current housing landscape.

Criticized for its limitations, the expenditure method set by the Task Force on Affordable Housing for All overlooks critical factors such as housing price fluctuations and the limited disposable income among lower-income brackets, offering a skewed view of India's housing situation.

With an estimated shortfall of 18.78 million households needing housing, according to the technical group on urban housing shortage, and independent studies indicating a demand for 29 to 50 million homes, the discrepancy points to a significant underestimation of India's housing crisis. The pandemic further highlighted the urgency to re-evaluate our understanding of housing affordability, as many faced challenges with rent during the reverse migration phenomenon.

The current method's shortcomings, including its inability to account for varying housing prices and the financial realities of those at the lower end of the income spectrum, suggest that policies based on this criterion may not effectively address the housing demand-supply gap.

It is imperative for the government to consider new indicators that accurately reflect on-the-ground housing affordability, taking into account regional price differences and adopting more nuanced methodologies that resonate with the housing market's dynamic nature.

Additionally, we must realise that housing demand is not a static number but a constantly evolving challenge. The acknowledged demand for 11.2 million houses barely scratches the surface. In cities like Mumbai, the existing definitions of affordability—such as the central government and GST's cap of ₹45 lakh and an area under 60 sqm—are out of reach for many, with even government-provided MHADA houses starting at ₹60 lakh.

This discussion calls for a refined approach to understanding and addressing housing needs, urging policymakers to adapt strategies that cater to the varied demands of India's population. A comprehensive re-evaluation of housing affordability criteria is necessary to ensure it reflects the realities faced by those striving to find affordable homes in India's complex housing market.

Keval Valambhia is chief operating officer, CREDAI-MCHI.