The article is authored by Mr. Mehernosh Tata, MD & CEO, Godrej Housing Finance
The Economic Survey 2025–26, released recently, projects India’s urban population to reach 600 million by 2036 and contribute nearly 70% of the nation’s GDP.
While rural-to-urban migration is driven by the search for better opportunities, the survey notes that many cities are nearing capacity limits, and the supply of affordable housing (under ₹50 lakh) in major cities has significantly decreased from 52.4% in 2018 to 17% in 2025. Affordable housing is soon becoming a supply-side problem.
As urbanisation grows and migration into cities deepens, the gap between demand and supply is widening rapidly, with the heaviest burden falling on Economically Weaker Sections (EWS) and Lower-Income Groups (LIG).
In this context, Housing Minister Shri Manohar Lal Khattar’s recent statement on revising affordable housing norms is both timely and necessary, and merits close attention. As per the current definition, affordable housing is defined as units up to 60 square metres priced at a maximum of ₹45 lakh.
While this threshold was relevant when introduced, it no longer reflects the reality of today’s cities, where land prices and construction costs have climbed steeply. What was once affordable is now aspirational, and households considered “middle income” are increasingly finding themselves outside the scope of government support.
As a result, even middle-income families, considered the backbone of India’s urban workforce, are excluded from schemes such as the Pradhan Mantri Awas Yojana (PMAY).
Revising these thresholds is not a cosmetic policy change; it is an opportunity to redefine affordability, reflect how Indian cities function, and get them future-ready for the influx of families moving to urban centres for jobs.
The Affordability Squeeze on India’s Middle Class
The urgency is clear. Property prices rose by an average of 6.5% in 2025, with sharper increases in markets such as Delhi-NCR and Bengaluru. In Mumbai, affordability stress has climbed to 48%. At the same time, wage growth has remained subdued, while new supply continues to skew towards premium housing, pushing homeownership further out of reach. Left unaddressed, this imbalance risks eroding social cohesion and dampening the aspirations of the very class that powers India’s cities.
Affordable Housing as an Economic Engine
Reimagining affordable housing isn’t just about meeting demand; it is about unleashing a powerful economic multiplier:
- GDP Contribution and Jobs: Real estate is already a key GDP driver. A stronger push for affordable housing can energize over 250 allied industries, from cement and steel to logistics and transport, creating millions of jobs across the skill spectrum.
- Financial Inclusion: For most families, a home is the first formal asset. It anchors them to build credit history, enable access to loans, and secure long-term financial stability.
- Wealth Creation: Paying an EMI instead of rent converts a recurring expense into an appreciating asset. This shift not only builds generational wealth but also unlocks disposable income that fuels consumption.
- Urban Productivity: Well-planned, affordable housing cuts commute times, reduces health stressors, and creates stable communities, all of which make urban centres more attractive for investment and talent.
- Housing for women: Homeownership for women has a multiplier effect that goes beyond shelter. It strengthens financial independence, improves access to credit, and enhances household stability. Evidence consistently shows that when homes are owned or co-owned by women, outcomes improve across health, education, and long-term savings, making women-centric housing a powerful lever for inclusive growth.
India’s urban future will be shaped by how decisively we address the affordability challenge. Updating outdated definitions is an important first step, but the bigger task is to design ecosystems of policy, finance and development that genuinely expand access. Affordable housing is not merely a subsidy-driven obligation; it is a long-term growth strategy, a chance to make cities more inclusive, and a pathway to secure the aspirations of millions of Indians.