Affordable Housing Crisis Deepens as Knight Frank Report Reveals Alarming Supply Shortage in India's Key Cities

Knight Frank's latest report has revealed a concerning trend in India's affordable housing sector, with supply dropping drastically across major metropolitan areas. The real estate consultancy firm's data shows that new affordable home launches have fallen to merely one-third of sales volumes in key urban markets, signaling a deepening crisis in the segment.

Critical Supply-Demand Metrics Expose Housing Shortage

The Knight Frank study indicates that the supply-to-demand ratio for affordable homes priced up to ₹50 lakh witnessed a sharp decline to 0.36 in the first half of 2025, compared to 1.05 in 2019. This dramatic fall highlights severe under-supply in the affordable housing segment across India's top real estate hotspots.

The report further states that affordable homes now constitute only 17% of new residential launches, a significant drop from the 52.4% share recorded in 2018. Industry experts warn that the current urban affordable housing shortage stands at 9.4 million units, with demand projected to reach 30 million units by 2030.

Eight Major Metro Cities Face Unprecedented Housing Challenge

The comprehensive study covers eight major metropolitan areas where the housing crisis is most pronounced:

• Bengaluru
• Delhi–NCR
• Mumbai Metropolitan Region
• Pune
• Kolkata
• Hyderabad
• Chennai
• Ahmedabad

These cities, which represent India's primary economic centers, are experiencing the most acute shortage of affordable housing options. For those looking at maximum rental returns in Delhi-NCR or exploring investment opportunities in Pune real estate, the supply constraints present both challenges and opportunities.

Market Dynamics Behind the Supply Shortage

Real estate industry analysts point to several factors contributing to the dip in affordable housing supply. Developers are increasingly shifting their focus toward high-margin luxury projects, driven by cost pressures and the potential for higher profit margins.

Supply-side bottlenecks present significant challenges, including escalating land and construction costs, financing difficulties, and infrastructure limitations. Despite government demand-side initiatives such as the Pradhan Mantri Awas Yojana (PMAY), new affordable housing launches have consistently failed to match the rising demand across emerging real estate markets.

Industry Leaders Call for Strategic Supply-Side Interventions

Sector leaders are urging the government and industry stakeholders to implement decisive reforms to address the affordable housing supply crisis. Key recommendations include utilizing public land resources through unlocking Public Sector Undertaking (PSU) land banks specifically for housing development.

The industry also advocates for simplifying zoning norms, including rationalization of Floor Space Index (FSI) regulations to enable more efficient land utilization. Expanding access to subsidized construction finance for developers represents another critical intervention area that could help bridge the supply gap.

Enhanced private sector participation through targeted incentives and risk-sharing models could also play a crucial role in addressing the shortage. For investors considering best cities to buy property, these policy reforms could significantly impact future market dynamics.

Housing Crisis Threatens India's Urban Development Goals

The widening gap between housing demand and supply in the affordable segment poses serious implications for India's inclusive urban growth trajectory. Without strategic supply-side interventions, the country risks falling significantly behind in meeting its urban housing requirements.

The crisis particularly affects first-time homebuyers and lower-income groups, who find themselves priced out of major metropolitan markets. This trend could lead to increased urban inequality and impact the overall economic development of cities that depend on a stable workforce across all income segments.

For those exploring options like property in Mumbai under 50 lakhs or looking at affordable property prices in Warje, the supply constraints highlight the urgent need for comprehensive policy reforms to ensure sustainable urban housing solutions.