The gleaming glass facades of luxury apartments in Mumbai’s skyline tell only half the story of India’s real estate market. Behind this veneer of prosperity lies an uncomfortable truth: millions of middle-class Indians are being priced out of their dream of homeownership, creating a silent crisis that threatens the nation’s social fabric.
The Numbers Tell a Stark Tale
For the average Indian family, the dream of owning a home has never been more distant. With a price-to-income ratio of 11 – meaning it takes 11 years of a household’s entire income to purchase a modest 90-square-meter apartment – India’s housing market has become twice as expensive as what’s considered affordable. While developed nations like the United States, Australia, and Germany maintain more accessible housing markets, India’s affordability crisis mirrors that of other developing nations like Bangladesh and Sri Lanka.
Beyond the Luxury Bubble
The real estate sector’s recent growth presents a paradox. While developers celebrate the boom in luxury housing and commercial properties, the fundamental issue of affordable housing remains unaddressed. The proliferation of high-end developments and premium projects, driven by wealthy buyers and commercial interests, has created a market that caters predominantly to the top tier of society.
Dr. Niranjan Hiranandani, Chairman, NAREDCO, underlined the need for a holistic solution to the challenges of affordable housing. “The affordable housing segment is currently experiencing negative growth. We urge an escalated flow of funds to reinvigorate this crucial sector, thereby promoting inclusivity and sustainable urban development.
Alongside housing, enhancements in energy and transportation infrastructure are indispensable. We underscore the necessity of these areas for sustainable urban growth and improved quality of life.”
The Root of the Problem
Unlike what many might assume, the crisis isn’t primarily driven by runaway price increases. House prices have appreciated by 9.3% annually between 1991-2021, comparable to gold (9.2%) and actually lower than both the Sensex (13.5%) and nominal income growth (12.5%). The real culprit lies in structural issues, particularly in India’s opaque and inefficient land markets.
Rectifying this calls for a change in policy as highlighted by Jay Morzaria, Director – Vraj Group and National Chairman – Naredco Nextgen. “To promote affordable housing, specific policy changes include subsidized land costs, increased Floor Space Index (FSI)/Floor Area Ratio (FAR), reduced GST rates on construction materials, and substantial reductions in premiums for projects with small-sized flats. These measures aim to lower development costs and improve project viability.”
One solution that could bridge the gap is that of PPPs. “Public-Private Partnerships (PPPs) play a transformative role by combining government resources and private sector expertise. Governments can provide subsidized land, invest in infrastructure, and offer financial incentives like tax breaks and subsidies. Private developers bring technical expertise, market understanding, and cost-efficient construction methods, such as prefabrication and modular techniques. Financial innovations, including blended finance models and subsidized mortgages, enhance funding options.”
The Transparency Deficit
India’s real estate sector suffers from what experts call “semi-transparent” status. While recent reforms like RERA and digitization of land records have improved matters, the industry still lacks the transparency seen in developed markets. This opacity manifests most clearly in land use planning – a mere 28% of Indian cities have approved master plans, and even these lack detailed implementation strategies.
The Competition Conundrum
This lack of transparency creates a vicious cycle. The difficult entry barriers for new developers result in an industry dominated by established players who can command premium prices. Unlike other sectors, real estate in India sees numerous firms maintaining unusually high profit margins (over 20%) in the long term, suggesting a lack of healthy competition that ultimately hurts consumers.
The Wealth Lock-in Effect
The current system has created a self-reinforcing cycle where real estate becomes an attractive investment for those with unaccounted wealth. It’s telling that 77% of India’s household wealth is locked in real estate, compared to 62% in China and just 44% in the US. This concentration of wealth in property further drives up prices, making housing increasingly unattainable for the middle class.
Breaking the Cycle
The solution lies not in band-aid fixes but in fundamental reforms. While government schemes often focus on increasing housing stock through subsidies, the key lies in addressing the root cause: credibly unlocking land supply in a planned and transparent manner. This would increase competition among developers, put downward pressure on prices, and ultimately make housing more affordable.
The Way Forward
As India stands at a crucial juncture in 2025, the need for reform has never been more urgent. The government’s recent announcement of a middle-class housing scheme shows recognition of the problem, but success will require a holistic approach. This means not just building more houses, but fundamentally reforming land markets, improving transparency, and creating a more competitive real estate sector.
The stakes are high. Access to affordable housing is about providing shelter, but equally, so much more. It’s about ensuring accessibility, creating wealth, and building a more equitable society, where the fruits of growth are available to all, and not just those at the top of the social ladder. The time has come to transform India’s real estate boom from a story of exclusion to one of inclusion.
