Affordable housing gap widens; India builds just 0.36 homes for every unit of sale: Knight Frank India
New Delhi : In its latest report- Affordable Housing: Tackling Urban Housing Deficit Through Supply-Side Reforms, Knight Frank India, a leading real estate consultancy in the country, in association of National Real Estate Development Council (NAREDCO), highlighted the critical supply challenges in India’s affordable housing sector. According to the report, the supply-to-demand ratio for affordable housing across the top 8 cities has plummeted to 0.36 in 2025 (until June), down from 1.05 in 2019, signalling a significant undersupply in the segment. This shift marks a turning point from the years when developers launched more affordable housing units than were sold, driven by schemes such as the Pradhan Mantri Awas Yojana (PMAY). In contrast, 2025 data show launches have collapsed to barely a third of sales, underscoring a deepening imbalance that threatens to impact housing affordability and limit buyer choice.
Demand Policies Help, but Supply Remains a Bottleneck
Over the past decade, policy interventions such as PMAY, Affordable Rental Housing Complexes (ARHCs), and tax benefits have provided critical support to homebuyers. These measures improved affordability and expanded access to credit for economically weaker sections and low-income groups. However, the report finds that supply continues to lag demand as developers face mounting challenges including high land costs, limited access to construction finance, regulatory delays, and inadequate infrastructure in peripheral urban zones.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “Affordable housing is not only a social priority but also an economic necessity. As India urbanizes rapidly, the imbalance between supply and demand in this segment poses significant risks to inclusive growth. While policy support on the demand side has been commendable, there is a pressing need to address supply-side barriers. Encouraging private sector participation through innovative financing, faster approvals, and land availability will be critical to bridging the gap and ensuring that every Indian has access to dignified housing.”
Affordable Urban Housing Deficit to Reach 30 mn Units by 2030
India’s existing affordable urban housing shortage is estimated at 9.4 mn units, with demand expected to rise sharply as urbanization accelerates. By 2030, cumulative affordable housing demand (including EWS, LIG, and MIG households) is projected to reach 30 mn units.
Gulam Zia, Senior Executive Director– Advisory, Valuation, and Research, Knight Frank India, said, “The sharp decline in the new supply-to-demand ratio from 1.05 in 2019 to 0.36 in 2025 demonstrates the urgent need for structural reforms. High land costs, inadequate institutional investments, and infrastructure deficits in peripheral locations continue to restrict developer participation. Without targeted incentives and financing mechanisms, affordable housing will remain underserved. Addressing these gaps can unlock private investment and create a sustainable ecosystem for the segment.”
Mr G Hari Babu, President, NAREDCO, said, “At the 17th NAREDCO National Convention, the Knight Frank & Naredco report has once again underlined the scale of India’s affordable housing challenge— a deficit of 9.4 million units that could rise to 30 million by 2030. The fact that new supply in this segment has dropped sharply while demand continues to grow is a matter of concern. Limited private investment further widens the gap. This Convention is the right platform to call for bold supply-side reforms— unlocking PSU land for housing, rationalising FSI norms, and enabling subsidised construction finance. These measures can restore affordability, attract private participation, and ensure that affordable housing becomes the real engine of inclusive urban growth in India.”
The report emphasises that unlocking affordable housing supply will require bold reforms and collaborative efforts among government, developers, financial institutions, and civil society. It recommends repurposing vacant PSU lands for affordable housing through public-private partnerships, increasing the free floor space index (FSI) to boost supply and reduce costs, and providing subsidized construction finance to developers, drawing on successful global models from project viability and attract greater institutional capital is also seen as critical. Together, these measures can create an enabling ecosystem where private participation becomes financially feasible, ensuring that affordable housing supply not only meets the growing demand but also supports India’s long-term vision of inclusive and sustainable urban development.