Affordable housing: The next big growth story with the right vision, policy, and investment

The 21st century is facing one of the most pressing humanitarian crises in modern history: The Global Housing Shortage. The UN projects that by 2030 nearly 3 billion people—about 40% of the global population—will require access to new housing units. This staggering demand translates into a need for nearly 96,000 new affordable and accessible housing units every single day. Meeting this demand will require an estimated investment of $3–4 trillion. This challenge transcends financial considerations and is both a moral imperative and a social obligation.

The scale of this crisis presents a unique and multi-decadal investment opportunity that could redefine the global real estate landscape, particularly in India. The housing shortage of 35 million units by 2030 in urban India highlights the pressing need to improve supply of housing units across the country. With a demographic sweet spot and a large working-age population, India is well-positioned to capitalise on its demographic dividend for the next 30 years. As young professionals seek homes of their own, even if just a quarter of India’s population aged between 25 and 35 were to seek new houses, the country would need to construct approximately 50 million new homes. Currently, the supply meets only about 1% of this demand.

Despite this clear opportunity, affordable housing in India remains underdeveloped, primarily on account of supply-side challenges. Affordable housing goes much beyond just providing low-cost homes; it involves creating a social ecosystem where communities can thrive.

Historically, high land costs have made development of affordable housing challenging for developers. Thanks to the massive mobilisation of infrastructure investments over the last decade, land parcels considered remote earlier have become connected to cities and are available at attractive prices in desirable locations, making the development of affordable and middle-income housing more appealing to developers. Additionally, policy interventions by certain state governments have helped support the supply of affordable housing. For instance, the Haryana government’s Affordable Housing Policy 2013, which mandated a certain percentage of land for affordable housing and provides incentives to developers, has been a resounding success.

Another big issue has been the rising construction costs that have impacted the margins for affordable housing development. To address this, the adoption of a manufacturing approach to real estate—focussing on standardisation, scale, and technological innovation—would prove pivotal.

Perception remains another hurdle, as affordable housing is often stigmatised as low-quality or a last resort for those unable to afford better options. This stigma has made developers reluctant to enter this space, despite clear demand visibility.

The Government of India’s initiatives under the vision of ‘Housing for All’ have significantly supported the development of affordable housing in the country. The Credit Linked Subsidy Scheme under the Pradhan Mantri Awas Yojana illustrates this success, disbursing Rs 58,900 crore in subsidies to 2.5 million beneficiaries, democratising homeownership for lower- and middle-income groups.

The government’s recent announcement to support the construction of 30 million affordable houses, including 10 million homes in urban areas, further underscores this opportunity. This initiative itself represents a $500-billion business opportunity, necessitating at least $100 billion in investment from both the public and private sectors.

However, if ‘Housing for All’ is to truly succeed in letter and spirit, it must be a private sector-led initiative. The success story of one of India’s Top 10 developers, which began its journey as an affordable and mid-income housing developer in a single micro-market just eight years ago, clearly debunks the myth that affordable housing is unattractive for the private sector.

Housing stands as the quintessential “merit good” in economic parlance, much like a modern-day Kamadhenu (the Indian bovine goddess), nurturing security and financial inclusion for homeowners while serving as a fountainhead of India’s economic prosperity.

India’s affordable housing sector is on the cusp of a $500-billion opportunity that checks all the right boxes—scale, social impact, business potential, and resilience to market cycle disruptions. The opportunity is real and tangible, driven by a young and growing population. The supply side is ripe for a paradigm shift, with new construction technologies and approaches waiting to be adopted and scaled.

With the right mix of vision, policy support, and investment, this sector could unlock a multi-decadal growth story that addresses a critical human need while offering enormous business potential.

Much like savouring desi Indian chaat at a Michelin-starred restaurant, affordable housing offers the best of both worlds: a sustainable, scaleable business opportunity that provides profits with purpose across market cycles.

All it requires now is unleashing the quintessential Indian entrepreneurial zeal.

The author is MD & CEO, HDFC Capital. Views are personal