India’s economic growth is closely associated with urbanization. Cities in India have offered a pathway to rapid poverty alleviation, sustained economic growth, and achievement of middle-income status. It is estimated that over 30 percent of Indians already live in urban areas and by 2030, 70 percent of new employment is expected to be generated in cities. Indian cities will need to accommodate 18 million new urban dwellers per year. While urbanization is placing cities as the main engines of economic opportunities and shared prosperity, to maximize gains from urbanization, it is critical for India to strengthen urban institutions, increase access adequate basic services and affordable housing. Nearly 90 percent of India’s 10 million housing unit deficit is concentrated in the Economically Weaker Section (EWS) and Low Income Group (LIG) population segments, and its shortage has contributed to spatially uncoordinated and unplanned urbanization, with nearly one quarter of the population living in slums.

Recognizing the relevance of the housing sector, the Government of India (GoI) launched in 2015 the national flagship mission, Pradhan Mantri Awas Yojana-Urban (PMAY-U), to address the rising housing needs of the growing urban population, especially those of low-income groups. PMAY-Urban (PMAY-U) consolidates previous urban housing schemes1 and aims to achieve ‘Housing for All’ by the year 2022. PMAY-U set out to close the housing shortage of about 20 million in India and had allocated about US$6 billion. However, for the ambitious national Government’s program to make a scalable and meaningful impact on the ground, and to incentivize the housing market to become more efficient, sustainable, and inclusive, state-level interventions to tackle key policy, institutional, and regulatory constraints are important.

Tamil Nadu, the leading urbanizing state among the large states in India, has struggled to meet the increased demand for housing and urban services. Supply-side constraints, insufficient resources, and weak institutions are some of the challenges experienced in Tamil Nadu and shared across different states in India. Housing shortage in the state was estimated at 1.2 million in 2017, and urban population is expected to grow, only increasing pressure on housing provision. The Government of Tamil Nadu (GoTN) has tried to address this shortage exclusively through public provision, but this has not been enough. Lack of an affordable housing market in the State has led to insufficient supply of affordable housing units to meet needs of the growing urban population. The lack of a formal housing policy, institutions with an outdated mandate, and regulations devised two-three decades back with minor revisions since exacerbate the challenges of creating a robust housing market needed to expand affordable housing.

More….