Affordable Housing Needs Policy Mix Beyond FSI: MoHUA

New Delhi, August 30, 2025: The 17th NAREDCO National Convention in New Delhi deliberated on one of the most pressing challenges in the real estate sector—affordable housing.

Kuldip Narayan, Joint secretary, Ministry of Housing and Urban affairs (MoHUA), emphasised that increasing Floor Space Index (FSI) alone cannot resolve the housing shortage. Instead, he underscored the need for a comprehensive policy mix involving land availability, planning regulations and economic incentives.

He observed that while higher FSI may work in land-constrained cities where vertical development is inevitable, it is only one part of the larger solution. The housing deficit, he noted, is largely driven by the opportunity cost of land rather than construction costs—especially in metros, where speculation has increased prices.

To address this, Narayan proposed a compliance framework requiring large residential townships and commercial projects above a certain threshold to allocate a share of their development to affordable housing. Developers, he said, could fulfil this obligation by constructing units within the same project, delivering them in another project within a one to six km radius or purchasing Affordable Housing development Transferable Development (TDR) from other developers.

If none of these options are viable, developers should contribute through a shelter fee determined by local authorities. At least, 40 per cent of the obligation, he recommended, should be met through actual construction, while the remaining can be settled through shelter fees. This blended approach would ensure a steady supply of physical housing while offering developers flexibility.

Highlighting the significance of location, Narayan stressed that affordable housing projects must be situated near metro corridors and transit hubs. Pushing low-income households to city peripheries, he warned, diminishes liveability and restricts access to jobs.

Debasish Prusty, Principal Secretary, Urban development and Housing Department, Rajasthan government, said that affordable housing projects in the state are progressing in the right spirit owing to three clear policy interventions—timely approval of building plans, streamlined regulatory practices and financial facilitation—backed by strong political will.

Rajasthan continues to upgrade its policies in line with evolving sectoral needs and is actively encouraging private sector innovation alongside government developers to optimise land use and layout planning, he added.

Adding a southern perspective, Apurva Tripathi, CEO, Life Mission, local self-government department, Kerala Government, highlighted that her state’s affordable housing projects are also gaining momentum due to the firm social and political commitment of the government towards targeted groups.

Closing the session, Narayan said that coordinated efforts between the Central and state governments and private developers, combined with inclusionary policies, TDR mechanisms and shelter fee regulations, are essential to create a sustainable pipeline of affordable housing across the country.