The rapid urbanization and migration to cities have caused severe urban housing shortages in India, particularly for the economically weaker sections. In this context, the Government and the Reserve Bank of India have undertaken a number of initiatives to boost affordable housing. Even as loan disbursements, as well as launches of new projects in the affordable housing segment, have risen sharply in 2016-17, there was an increase in nonperforming housing loans, particularly for the lower slabs of home loans. While the credit-linked subsidy scheme was found to be effective in improving the housing affordability of the economically weaker sections, the unlocking of land in the urban areas poses a major challenge for further development of the sector.

In India, rapid urbanization has given rise to development challenges in the form of urban congestion, pressure on basic amenities like water and sanitation, and most importantly, severe housing shortages in cities, especially, in the low-cost segment. Real estate developers and private players tend to focus on middle-income and high-income segments due to higher returns. In addition, issues relating to high land costs, delays in project approvals, increasing raw material costs, and low-profit margins have made low-cost housing projects less attractive for private realty investors and developers. In order to bridge this demand-supply gap.

The Government of India has recently taken major initiatives to provide a boost to affordable housing in India, complemented by a number of measures by the Reserve Bank of India (RBI). In view of the increased attention received by affordable housing in the recent period, an attempt has been made in this article to study various dimensions of affordable housing. The rest of the article is structured into six sections. Section 2 discusses various measures of housing affordability and the international experience in the policy design for affordable housing. Section 3 highlights the need for affordable housing in India and the steps taken by the Government and the Reserve Bank of India to provide a boost to this sector. Section 4 presents some stylized facts based on housing credit data. An empirical assessment of the impact of the Credit Linked Subsidy Scheme on housing affordability is provided in Section 5. Section 6 flags some of the major challenges faced by the affordable housing sector in India.