Housing, particularly for low-income urban households, is a long-standing challenge in India. This study empirically analyses three demand side aspects of this challenge employing nationally representative household data and draws relevant policy implications based on the findings. Past estimates of housing shortage focused on the physical inadequacy of housing. It included households which were homeless, households that lived in katcha houses that cannot be upgraded, or in houses that were obsolete, and households that lived in congested conditions. Households where married couples do not have a separate room are considered as households living in congested conditions. This paper finds that in 2018, urban housing shortage based on the number of physically inadequately housed households was 29 million, 54 per cent higher than 2012.

In 2012, urban housing shortage of 18.78 million units affected about a quarter of urban households. About 96 per cent of this shortage was accounted for by housing for low-income groups. The first objective of this study is to present a more contemporary picture of the urban housing challenge by estimating the number of inadequately housed households, and thereafter, the urban housing shortage. The second objective is to understand the nature of households’ consumption demand for housing, i.e., their demand for housing for residing in the house. This will help address the issue of inadequate housing in low-income households. Since congestion is a major cause of physical inadequacy of housing, the third objective is to understand the effect of living in congested conditions on the demand behaviour of households for housing.