Affordable housing shortage to touch 312 lakh units by 2030: CII-Knight Frank report

The cumulative affordable housing demand in India is projected to reach 312 lakh by 2030, with the market size estimated at ₹67 tn, the report said

Affordable housing in India is expected to touch 312 lakh units by 2030 with a potential market size of ₹67 trillion, a report by Confederation of Indian Industry (CII) and Knight Frank has said, adding the segment could also provide several opportunities for financial institutions.

Affordable housing in India is expected to touch 312 lakh units by 2030 with a potential market size of ₹67 trillion, a report by Confederation of Indian Industry (CII) and Knight Frank has said.

The report titled Affordable Housing in India: Demand-Supply Assessment and Financing Opportunity launched during the CII Conference on Indian Housing Landscape – Affordable to Accessible observes that there is already an existing shortage of 101 lakh units.

According to the analysis by Knight Frank India, the cumulative affordable housing demand in India is projected to reach 312 lakh by 2030, with the market size estimated at ₹67 tn.

Addressing the event, Ghulam Zia, Senior Executive Director, Research, Advisory, Infrastructure & Valuation at Knight Frank India, pointed out the shortage of affordable housing in India presented a business opportunity for real estate developers.

"The cumulative Affordable housing shortage in India is projected to reach 31.2 million by 2030, with the market size estimated at ₹67 trillion," he said, adding it also provides several opportunities for financial institutions.

"Affordable housing is both a pressing challenge and an opportunity to drive India's real estate growth. As urbanization accelerates, bridging the housing deficit through innovative strategies and collaborations is imperative,” said Neel Raheja, Chairman, CII National Committee on Real Estate and Group President, K Raheja Corp.

Affordable housing segment could provide opportunities for financial institutions

"Based on the assumption of a 77 per cent loan dependency and Loan-to-Value ratios applied at various loan thresholds, the potential financing opportunity for banks and Housing Finance Companies in the affordable housing segment is estimated to be ₹45 trillion," the report said.

This represents a substantial increase, being three times more than the existing loan volume in this segment, it added.

Update definition of affordable housing

Additionally, the RBI's definition of affordable housing, linked to priority sector lending, requires an update. At present, home loans qualify as priority sector lending if the unit price is under ₹45 lakh in metro cities and ₹35 lakh in non-metro cities. However, since the RBI's last revision in 2019, housing prices have increased significantly.

Adjusted for consumer price inflation (CPI), the average house price in metro cities has risen from ₹45 lakh in 2019 to ₹57 lakh in 2024, while in non-metro cities, it has grown from ₹35 lakh to ₹44 lakh during the same period, the report said.

Policy measures required to encourage private developers’ participation

The report notes that in the last few years, the private developers’ participation in affordable housing projects have moderated due to lower profitability of the projects due to increase in land costs, construction costs, lack of institutional investments.

The report suggests that to attract private developers’ participation into affordable housing the government should unlock vacant PSU lands.

The FSI/FAR limits in Indian cities are very restrictive when compared globally. Increasing the free/base FSI for the affordable housing development can potentially reduce the overall cost of the dwelling and make it financially conducive for the developer to infuse supply while benefiting the consumer.

There is a need to provide tax incentives such as rebates on GST, subsidies for the private developers to improve the financial feasibility of the project, it said.

In addition to the above measure, development of new satellite cities with adequate physical and social infrastructure can reduce the housing burden from the mega cities, the report said.