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Rajiv Gauba of Niti Aayog highlighted that high land costs are a major barrier to affordable housing in India, as land accounts for 50-70% of project costs. He urged policy reforms, including dedicating at least 10% of residential land for affordable housing, raising permissible FARs to 5&6, promoting transit-oriented development, and adopting land pooling. Limited access to formal credit and low investment margins in economically weaker segments further hinder development. Measures like rental housing improvements, credit support, and stamp duty reductions were also recommended to enhance housing availability and market efficiency.
New Delhi officials have emphasised that rising land prices continue to challenge the expansion of housing projects in India, particularly in the affordable segment. Rajiv Gauba, a member of Niti Aayog, explained that land constitutes 50-70% of total project costs, which is significantly higher than in comparable infrastructure sectors, making development less viable for low- and middle-income housing. Advertisement
Gauba proposed several reforms to improve land utilisation and reduce costs. He suggested earmarking at least 10% of residential land in master plans for affordable housing, increasing permissible Floor Area Ratios (FARs) from 2-3 to 5-6, promoting transit-oriented development, and implementing land pooling. These steps, he noted, would unlock additional housing supply while lowering development expenses.
Limited access to formal credit adds pressure on developers, forcing reliance on high-cost financing and reducing project viability. Margins for economically weaker and low-income groups are particularly thin, discouraging private sector participation. Additionally, close to 1 crore housing units remain vacant nationwide, indicating inefficiencies in housing allocation and utilisation.
Gauba emphasised the need for reforms in the rental housing market, including revising tenancy laws, rationalising municipal charges, and promoting diverse rental housing models. He recommended creating anchor funds and dedicated financing mechanisms to attract private investment. Measures such as profit exemptions for affordable housing projects, raising credit guarantee limits under the Credit Risk Guarantee Fund Trust, waiving profit fees for land dedicated to affordable housing, and reducing or exempting stamp duty on affordable units could further improve project feasibility.
Niti Aayog has collaborated with the Ministry of Housing and Urban Affairs and the Department of Financial Services to develop recommendations grounded in global best practices, evidence-based analysis, and cross-sectoral insights. Officials urged the adoption of these reforms to strengthen housing availability across income segments.
The Department of Financial Services confirmed that 3 crore additional houses have been sanctioned under the Pradhan Mantri Awas Yojana (PMAY), with 2 crore in rural areas and 1 crore in urban centres, aiming for a total of 7 crore houses by 2029. Nearly 4 crore homes have already been constructed under the scheme. The National Housing Bank has provided concessional refinance worth INR 60,000 crore until December 2025, supporting approximately 5.85 lakh dwelling units.
Policy updates, including higher housing loan limits, broader loan eligibility, and reduced GST on key construction materials, have been implemented to improve affordability and credit flow. These structural reforms, combined with the proposed land and financing measures, are intended to enhance housing accessibility and support sustainable growth in the sector.
Source PTI
FAQ
Q1. What is the main barrier to affordable housing identified by Niti Aayog?
Niti Aayog, through Rajiv Gauba, has identified high land costs as the primary obstacle to affordable housing in India. Land accounts for 50-70% of total project costs, which is significantly higher than in other infrastructure sectors. This makes development of housing for low- and middle-income groups less financially viable and restricts private sector participation in affordable housing projects.
Q2. What land policy reforms are being suggested?
To improve housing affordability, Niti Aayog has recommended several land policy reforms. These include earmarking at least 10% of residential land in master plans for affordable housing, raising permissible Floor Area Ratios (FARs) from 2-3 to 5-6, promoting transit-oriented development near transport hubs, and implementing land pooling to consolidate smaller plots for large-scale projects. Such measures are intended to unlock additional supply while reducing development costs.
Q3. How does access to credit affect housing development?
Limited access to formal credit increases reliance on expensive financing, squeezing developer margins and making projects in economically weaker segments less attractive. Niti Aayog has emphasised the need for dedicated financing mechanisms, anchor funds, and credit guarantee support to improve project feasibility. Strengthening credit availability will allow developers to invest more confidently in affordable housing and expand supply to underserved segments.
Q4. What reforms are suggested for the rental housing market?
Reforms for the rental housing sector include revising tenancy laws, rationalising municipal charges, and promoting professionally managed rental housing models. By modernising regulations and reducing operational costs, these measures aim to improve rental housing availability and encourage private investment in this segment.
Q5. What incentives are suggested for affordable housing projects?
Niti Aayog has proposed incentives such as profit exemptions for affordable housing projects, increasing limits under the Credit Risk Guarantee Fund Trust, waiving profit fees for land dedicated to affordable housing, and reducing or exempting stamp duty on affordable units. These steps are designed to enhance project viability and encourage private developers to actively participate in the affordable housing market.
Q6. What progress has already been made under PMAY?
Under the Pradhan Mantri Awas Yojana (PMAY), 3 crore additional houses have been sanctioned, including 2 crore in rural areas and 1 crore in urban centres, bringing the total target to 7 crore houses by 2029. Nearly 4 crore homes have already been constructed, supported by INR 60,000 crore of concessional refinance provided by the National Housing Bank, which has helped finance approximately 5.85 lakh dwelling units.
Q7. What other policy measures are supporting housing affordability?
Recent policy measures to enhance affordability include higher housing loan limits, broader loan eligibility criteria, and reduced GST on key construction materials. These reforms, combined with the proposed land and financing measures, are aimed at improving housing accessibility, promoting efficient use of land, and supporting sustainable growth in the housing sector.
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