Escalating Urban Housing Costs and the Deepening Inequality in Indian Cities

Context:
Urban housing prices in Indian cities have surged sharply, making homeownership increasingly unaffordable for middle- and lower-income groups. A 2BHK flat in cities like Patna costing over ₹1 crore reflects a structural shift where housing is treated primarily as a financial asset rather than a social necessity, intensifying urban inequality and exclusion.

Key Highlights:

• Nature of the Crisis

• Rapid escalation in property prices across Tier-I and Tier-II cities.

• Real estate–led urban development prioritizes capital appreciation over affordability.

• Coexistence of lakhs of vacant houses alongside overcrowded slums.

• Structural Causes

• Urban land acquired cheaply, later sold at inflated post-development prices.

• Increasing financialization of housing and speculative land hoarding.

• Housing supply calibrated to purchasing power, not actual need.

• Limited regulation of Floor Area Ratio (FAR) constraining supply.

• Governance and Policy Concerns

• Criticism of viewing land as a revenue-generating asset (as reflected in certain policy approaches).

• Weak implementation of inclusionary zoning norms.

• Lack of effective taxation on vacant or underutilized properties.

• Social Impact

• Families postpone education and healthcare spending due to housing burden.

• Migrants remain in informal settlements, unregistered and politically voiceless.

• Rising ghettoization and segregation, especially affecting Dalits and Muslims.

• Erosion of urban citizenship and spatial justice.

Relevant Prelims Points:

• Floor Area Ratio (FAR)

  • Ratio of total built-up area to plot size.

  • Higher FAR increases housing supply density.

  • Controlled by local urban development authorities.

• Inclusionary Zoning

  • Mandates a fixed proportion of housing in new developments for economically weaker sections (EWS) or lower-income groups.

  • Used in countries like the Netherlands and USA.

• Affordable Housing Policies in India

  • Pradhan Mantri Awas Yojana (PMAY-Urban) – Housing for All mission.

  • Credit-linked subsidy for EWS/LIG/MIG groups.

  • Affordable Rental Housing Complexes (ARHC) scheme for migrants.

• Spatial Justice

  • Concept emphasizing equitable access to urban services, housing, and opportunities.

• Singapore Housing Model

  • Government-led Housing Development Board (HDB) provides large-scale public housing.

  • Ensures social integration through quota-based allocation.

• Vacancy and Speculation

  • Inverse taxation on unoccupied houses proposed to discourage speculation.

Relevant Mains Points:

• Housing as a Commodity vs. Social Good

• Shift from welfare-based housing to market-driven real estate model.

• Echoes Friedrich Engels’ critique of commodification of shelter.

• Financialization disconnects housing from its social function.

• Urban Governance and Land Policy Failures

• Monetization of land by development authorities fuels speculation.

• Inadequate regulation of land monopolies.

• Underutilization of planning tools like higher FAR in affordable zones.

• Weak enforcement of land value capture mechanisms.

• Economic Implications (GS III)

• High housing costs reduce household disposable income, impacting consumption.

• Contributes to urban informalization and productivity losses.

• Deepens wealth inequality via asset concentration.

• Social Justice Dimensions (GS I & II)

• Segregation leads to social fragmentation and identity-based clustering.

• Marginalized communities pushed to peripheral areas lacking amenities.

• Violates principles of equity and inclusive growth.

• Limits of Peripheral Expansion

• Transit-based solutions insufficient without schools, healthcare, jobs, and social infrastructure.

• Peripheral housing without amenities exacerbates exclusion.

• Policy Solutions Suggested

• Inclusionary zoning mandates (Dutch model – social housing in every project).

• Taxation on vacant properties to mobilize unused stock.

• Reform in urban land valuation and allocation policies.

• Expansion of affordable rental housing in central locations.

• Integrated land-use and transport planning.

• Way Forward

• Reorient housing policy toward “housing as a right” rather than an investment vehicle.

• Strengthen public housing agencies in urban areas.

• Mandate mixed-income development models.

• Reform FAR norms to increase supply while ensuring sustainability.

• Improve urban local body capacity in land governance and planning transparency.

UPSC Relevance (GS-wise):

• GS I – Indian Society: Urbanization, segregation, housing inequality.

• GS II – Social Justice & Governance: Affordable housing, urban citizenship, inclusive planning.

• GS III – Economy: Real estate sector, financialization, urban development model.

• Prelims: FAR, Inclusionary Zoning, PMAY, ARHC, Spatial Justice concepts.