June 17, 2025
NEW DELHI – Paradoxically, India’s government housing projects struggle with a significant deficit among the economically weaker sections, whose needs remain largely unmet despite a substantial amount being spent on multiple housing projects promoted by state or central Governments. This results in idle assets due to a poor pricing strategy and an inappropriate choice of locations, widening the gap between demand and supply without understanding the ground-level needs. It symbolises a mismatch between human needs and the administrative understanding of the ground reality due to a limited reach. This entails a profound strategic realignment of thought to position the inventory in the ecosystem to benefit the intended users rather than arbitrarily wasting public money.
A survey conducted by the Ministry of Housing and Urban Affairs found that approximately 10 million units are unsold in urban areas alone, and this figure increases to 19 million when rural areas are also taken into account. Knight Frank (a reputed real estate consulting firm) highlighted in their report of 2024 that the unsold housing inventories are 4.68 lacs units in the top eight cities of India, and Mumbai Metropolitan Region (MMR) accounts for 47000+ units. Undoubtedly, this deficit affects the lowerincome group segment most, followed by the middle-income group home seekers. National trends are truly reflected in Maharashtra housing data, indicating a strong disconnect between planning and economic reality on the ground. The planned housing by March 2024 was 19.40 lakh, and the achieved number was 30 per cent less. This shortfall poses challenges for urban poor, middle-income, and lower-income groups, and paradoxically, inventories are accumulating in cities or nodes like Nagpur, Thane, and Palghar.
The unsold units are building up due to several factors, including pricing mismatches, location disadvantages, premature launch when the public transport ecosystem is not ready, and a lack of marketing and branding initiatives (a typical government mindset, assuming people will come without advertisement and branding). Currently, the nature of the economy post-Covid has shifted to include gig workers, the migrant workforce, students, young professionals, and transferable government employees who need housing on a short-term basis. Therefore, the demand for urban housing purchases was previously misjudged and over-politicized.
Over time, these unsold units will become obsolete assets and will be severely damaged, rendering them unfit for human use. Without abandoning or dismantling them in the distant future, a pragmatic way of repurposing these inventories can be a win-win situation for the intended beneficiary and save the government from wasting vast amounts of money they have invested from the public exchequer. A longterm (15 to 20 year) rental lease, coupled with a lease-to-own scheme after the lease term expires or offering them the right of first refusal, might provide a solution that can add value to the community at large. Due to indexation, this scheme will provide a straightforward solution for both the Government and prospective tenants.
Solutions of the renting model can be of different varieties, long-term lease, lease-to-own options, and early exit provisions. In long-term leases, unsold units can be monetised over 10- 20 years, capitalising on the market’s demand for affordable housing among tenants in this segment. Due to inflation-indexed rent, where the rent is adjusted based on the inflation rate, this becomes a stable and feasible solution to bring rationality to the scheme. A long-term lease promotes a stable community formation and fosters the development of a new local ecosystem. Alternatively, in the lease-to-own mechanism, tenants have the right of first refusal to purchase the units they are dwelling in after the lease expiry, at a reasonable price after due indexation.
This provides an aspiration for one’s own house through a long-term mechanism without immediately feeling the upfront payment burden. Lastly, in the early exit option, tenants are allowed to exit the lease before the term ends and buy the asset, or the same can be reallocated to another prospective tenant. This provides flexibility to tenants who may need to change their housing situation before the lease term ends. This repurposing model aims to optimise or recover a portion of the lost investment by addressing the rental shortage in the market. The government must promote affordable housing as an advantage, building a new ecosystem around it.
Due to the rapidly expanding urban boundary, idle assets will attract further public investment from local bodies, and the nearby metro city will become less congested. And people without immediate purchasing power will have a roof over their heads. Unused assets are prone to decay faster than usual. Ultimately, the assets will have greater durability due to proper maintenance, and the government’s public investment will have adequate justification. This will also reduce fiscal drag, which refers to the negative impact of inflation on the purchasing power of the Government’s funds. As a result, the Government housing agency can move forward with more such housing projects after the successful rollout of the model.
The policy must transparently address key hurdles, including eligibility criteria, operational framework, and compliance requirements, moving beyond its traditional mind-set and restructuring its policy document through deliberation and due diligence within a new framework and, of course, enhancing its strategy and public awareness campaigns. The international model provides valuable insights to offer a formulation guideline for the Indian model. The Singapore model offers a 99-year lease period, applicable across various income groups. The ‘Balanced affordability rent-to-own’ housing scheme in Europe is also a popular and successful model. The UK’s ‘shared ownership’ promotes gradual ownership of assets. These models have achieved a high success rate worldwide. The Indian model can take a different format, considering our demographics, economic strength, and political compulsions.
MHADA may develop a pilot project with a blueprint aligned with the problem statement. Buildings lying unused in Dombivli, Vasai-Virar, Nashik Road, and Nagpur can be taken up for a pilot rollout. The conditions are still livable, with all essential infrastructure in place. A digital rental portal would be needed. A transparent, tech-enabled platform can be set up with private and government participation. A detailed flow chart can be developed based on the model’s specific needs. Once the eligibility framework is decided to attract more tenants, such as EWS, LIG, and other lower-middle-class and service workers, then its success will be a game-changer. Indexed rent should be inflationlinked to insulate tenants from any financial loss, as public housing is not intended for profit. End-of-lease valuation is another technical parameter that needs a policy definition.
Otherwise, at the end, the tenant will face legal hassles. Finally, private expert participation is required to manage these lease terms with mass tenants without any disputes, which is a challenge that government bodies cannot handle, as it involves property managers, legal experts, and NBFC (non-banking financial corporation) funding, which coowns the asset until closure. Critics, however, may argue and put forward contrary views, saying that the dilution of the idea of home ownership and, in the future, the shift towards renting models will result in the cannibalisation of the real estate market and the housing bank lending ecosystem. owever, the current economic structure, which is shifting away from the traditional model, is forcing home buyers to avoid committing to a lifelong loan structure.
More than property papers, stability and flexibility are more critical to current generations. Another point that might arise is rent default which can be addressed through an administrative model linking financiers, employers and thirdparty agencies (facilitators) with added government oversight coupled with digitised rent agreements. The major roadblock in launching this scheme will be the Builders’ Lobbies of the country. They should be handled differently by allowing them to invest in other allied infrastructure projects with some business incentives, such as extra FSI and tax rebates. This will support the evolving neighbourhood ecosystem and bring completeness to the model so that they feel like a complementary partner, not a competitor.
India’s housing challenge is multifaceted. Therefore, the solution requires multi-party participation, where the government, the financial institution, the legal support providing agency, the operational team, and many other indirect bodies will work together to make it a successful governance model. In the end, this will reduce the gap between demand and supply, transforming these idle assets into a community-oriented beneficial outcome that fosters inclusive urban growth, social equality and economic empowerment.
The writer is a Mumbai-based freelance writer, MSME strategist and industry mentor.