India, like most developing and urbanizing nations, faces a large housing shortfall. Although unlike its peers, the economy has grown rapidly over the past two decades, urbanization has not kept pace with the growth. The pace of urbanization has lagged that of its peers, and even today, about 30% of India’s population lives in cities versus an average of 50% globally and over 70% in developing nations. About half of India’s population is expected to reside in cities by 2050, making the density in cities among the highest in the world. The government faces a huge challenge, not only in meeting the housing shortage, but also in planning and facilitating housing for millions who will move to urban areas over the next two decades.
The Narendra Modi led Government aims to provide housing for all by 2022 this entails building about 100 mn homes, about 95% of which will be in the Economically Weaker Section (EWS) and Low Income Group (LIG) categories, at a cost of Rs 108 tn. The government alone cannot provide this; consequently, incentivizing private players is crucial. Private developers will need to re-focus their models on volumes rather than pricing. Housing finance companies will benefit from strong demand as the sector moves towards the low end of the market.
More money is required to fund land and build EWS and LIG homes than the value realized by selling them at government rates. Hence there is little participation from private developers and government cannot fulfill this on its own. Further, households in the EWS category are not funded by housing-finance companies. The government needs to address this shortfall.