Observer Research Foundation Mumbai

Ideas and Action for a Better India

ORF Discussion Paper – Affordable Housing: Policies for Mumbai’s Poor

Poverty, Urban Density and Living Conditions amongst the poor in Mumbai

There is a huge proportion (55% or 8 million) of the city’s total (16 million) population living in informal and sub-standard conditions, in a very concentrated/dense manner (on only 6% of the total land of the city).[1] Slums have become characteristic of Mumbai and their glamorization, aided by films like Slumdog Millionaire, has desensitized poverty in public consciousness. Moving past this sentiment we need to remind ourselves that slum residents face problems and difficulties in even obtaining the basic necessities such as water, sanitation, electricity, security, health, and education. There is nothing glamorous about their living conditions. Slum dwellers play an integral role in the economy of Mumbai (with many working as drivers, cooks, maids, bank clerks and office assistants) and yet they are denied a dignified standard of living especially in terms of cleanliness, hygiene, health and safety, which other citizens take for granted.

Whilst it is widely known that such large numbers of people living in relatively concentrated pockets of land put enormous strains on public infrastructure and the environment, we still see that not enough money is being invested in public and social infrastructure to upgrade and expand them to meet these citizen’s needs. McKinsey’s recent report (titled India’s urban awakening: Building inclusive cities, sustaining economic growth) established that public investment in the average Indian city was a mere $17 per person, whereas in China the same expenditure is $116 per person. The report suggests that India’s current under-investment needs to be expanded to $117 per person.

According to Dr Sulakshna Mahajan of the All India Institute of Local Self Governance, a healthy habitat is one with minimum space norms of 10 square meters per person. Yet, shockingly, in Mumbai, each individual gets a mere 2.5 square meters to herself/himself. This extreme high density of people clustered together is unrivalled globally. Density on its own is not necessarily bad – all cities are dense by definition – but what is important is whether and how the supporting infrastructure is provided to cope with the load of inhabitants. Furthermore, in Mumbai the distribution of living space and amenities are skewed towards the rich. What is clear in the case of Mumbai is that the poorer sections of society (which is an almost overwhelming majority) lack access to safe, clean, affordable housing as well as basic services.

Persons per Sq Km

Area (year) Maximum Minimum Average
Dharavi  (2007) 336,000 314,000 325,000
Island City Wards (2001) 114,001 (Marine Lines) 16,868 (Colaba) 43,447
Suburbs Wards (2001) 49,006 (Kurla) 7,270 (Mulund) 21,284
Greater Mumbai (2001) 24,812
Maharashtra (2001) 314
India (2001) 334
Manhattan (2000) 26,978
New York (2000) 10,238
(Sources: Census 2001, India; Census 2000, USA; Survey by the Kamla Raheja Vidyanidhi Institute of Architecture (KRVIA) 2007)

This phenomenon of high density urbanization can be attributed to various factors, including: sustained rural-to-urban migration, rapid population growth, scarcity of land, and the changing structure of cities. These are not issues only specific to Mumbai, but they do affect the city adversely, especially when the policies and investments in public infrastructure and services do not keep pace with the requirements.

The universal need and right to shelter

Article 17 of the declaration of Human Rights state that: “(1) Everyone has the right to own property alone as well as in association with others; and (2) No one shall be arbitrarily deprived of his property.” [2]

Similarly, Article 25 outlines that: “(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control; and (2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.”[3]

Although a right to a home is not explicitly expressed in such terms as a basic constitutional right, Article 19(e) does state that all citizens have a right “to reside and settle in any part of the territory of India”[4], and also to own and use land, which in effect makes provisions for the housing of economic migrants, such as those we see living in Mumbai’s slums.

As per the 2001 Census, India has about two million homeless people. However, the international NGO Action Aid estimated in 2003 that there were nearer 78 million homeless people in the country[5]. Although no exact data is available on the number of homeless people in Mumbai one can imagine that the figure must be a few million large cumulatively, considering the vast scale of poverty and slum settlements. It has been estimated that between November 2004 and January 2005 alone, roughly 80,000 homes were demolished, affecting some 300,000 people, who are still not all resettled, and a further 250,000 plus are thought to be living on pavements[6]. If we are to provide housing to meet the needs of all citizens we need to dramatically expand the national housing stock and ensure that prices are maintained at such levels that these homes are within reach of those who need them the most.




What do we mean by affordable housing? Affordable for whom?

Affordability can be an elusive term. Generally affordability is defined in terms of a given proportion of annual household income. The measure is flexibly used to mean prices of homes ranging anywhere from 15% to 40% of family incomes.

According to the UN Committee on Economic, Social and Cultural Rights, Affordability is defined in a manner that “personal or household financial costs associated with housing should be at such a level that the attainment and satisfaction of other basic needs are not threatened or compromised”[7].

The Government of India, Ministry for Housing and Urban Poverty Alleviation more precisely defines Affordable Housing in the context of India as “houses ranging from about 300 square feet (super built up area) for EWS, 500 square feet for LIG and 600 square feet to 1200 square feet for MIG, at costs that permit repayment of home loans in monthly installments not exceeding 30% to 40% of the monthly income of the buyer.”[8]. This definition has been created with the consideration that the EWS and LIG segments suffer the most from lack of access to affordable homes.


Income Level Income per month Income Per Annum Size of Dwelling Unit
Economically Weaker Section < INR 12,500 < INR 1.5 lakhs per annum Up to 300 sq. ft.
Lower Income Group INR 12,500 – 25,000 INR 1.5 to 3 lakhs per annum 300-600 sq. ft.
Middle Income Group INR 25,000 – 83,333 INR 3 to 10 lakhs per annum 600 to 1200 sq. ft.
Sources: KPMG/Knight Frank/Credit Suisse Analysis


Segment EMI to monthly income: 30 – 40% House Price to Annual Income Ratio: Less than 5.1[9]
EWS Maximum Rs. 5000  Maximum of 765,000
LIG Maximum of Rs. 5000 – Rs. 10000 Maximum of Rs. 765,000 to 1,530,000
MIG Maximum  of Rs. 10,000 – 33,333 Maximum of Rs. 1,530,000 – 5,100,000
Source:  Based on the data above from KPMG[10]


Deepak Parekh Task Force

Category Cost EMI/Rent Carpet Area
EWS/LIG Not more than 4 times the household gross annual income  Not exceeding 30% of the household’s gross monthly income 300-600 sq. ft.
MIG Not more than 5 times the household gross annual income Not exceeding 40% of the household’s gross monthly income Not exceeding 1200 sq. ft.



Category Income per month Income Per Annum Affordability calculated based on Deepak Parekh Task Force Ratio Prices from MHADA’s projects in 2010
EWS Below Rs. 8000 /- Up to INR. 96,000 384,000 394,450
LIG Between-Rs.8,001/- Rs. 12,000 INR 96,012 to 144,000 480000 – 720,000 765,852
MIG Between-Rs.12,001/- Rs. 20,000 INR 144,012 to  240,000 1,474,300
HIG Between- Rs.20,001/ and above > INR 240,012 4,860,000
Source: MHADA –

The majority of the literature on affordable housing for low-income groups focuses on: government provision of services, existing policies details, various government schemes, inclusivity of the beneficiaries, and on affordability as per what the government considers. However, there is limited discussion of affordability from the perspective of the households or individuals. Naturally, the definition of ‘affordable’ is also subject to change over time. As far as we are aware, no conclusive study has been conducted to identify in real terms how much a low-income household in Mumbai can afford, in what manner they can afford it, and what housing they consider sufficient (as well as ideal) for their family requirements. Even affordable housing in Mumbai appears to be a supply driven market.

A number of private developers have also started their own housing schemes for the lower income groups. Tata’s Housing project ‘Shubh Griha’ categorization of affordable homes are those priced between three to seven lakh rupees, and Tanaji Mulsare City (TMC) a subsidiary of the Rustomjee & Evershine Group caters to the low income segment with affordable homes from two to seven lakh rupees. They are currently undertaking a Rs. 800 crore project to serve these segments.

Cost of homes in certain current representative affordable housing projects in Mumbai

Project Location Average Cost of a Home in INR
Tata Housing Boisar 400,000 – 700,000
Samruddhi Complex Karjat 350,000 – 450,000
Vaishnavi Sai Complex Virar (East) 700,000 – 1,300,000
Tanaji Mulsare City (TMC) – part of Rustomjee & Evershine Group   200,000 – 700,000
Sources: various

When we discuss affordability, we must consider affordability not just in housing but also in terms of habitats (including recreation spaces) and workplaces in this regard. After all, the poor depend the most on their livelihoods. In a landmark case in 1986, the Bombay High Court ruled that the Right to Life included the Right to Livelihood. For the poor, livelihoods are largely determined by where they live and the space they have for working in[11]. Therefore we need to consider affordable places for the poor for all manner of economic and social activity.

High land prices (average cost per square foot in Mumbai ranges from to Rs. 1,000[12] to Rs. 40,000 and upwards in luxury residential localities[13]) and archaic laws such as the Rent Control Act (which has kept rents down as low as Rs.1 per month in prime commercial areas like Fort), make it difficult, if not impossible for those at the middle and lower income levels to afford a legitimate home. Furthermore, prices continue to rise rapidly; recent reports find average increases of 18-20 per cent over the past 12 months[14]. So high are the prices that even the “middle class can no longer afford to buy property in India’s financial hub. Residential real estate prices are reaching levels that several builders and real estate experts say are bordering on ‘sheer craziness’.”[15] HDFC and the RBI too are weary of the situation and are closely watching these price trends.

Rising Prices (per Sq. Ft) in Mumbai

Mumbai – Average Capital Values (per sq.ft) price changes
Micro Market Dec  –  09 Mar – 10 Price Change
Andheri (W) 11,500 15,000 30%
Goregaon 7,000 8,750 25%
Borivali 6,000 7,000 17%
Central Mumbai 12,000 14,000 17%
South Mumbai (GRADE A) 60,000 65,000 8%
Source: Knight Frank April 2010 – E&R at a Glance (Economy and Realty)

With such high and variable prices, it is no wonder that many people, even those who can afford better accommodation, prefer to stay in slums in view of the alternatives (or distinct lack thereof). In Mumbai where location is one of the most important factors of consideration, people are willing to stay in less than ideal conditions, so long as they can have a reasonable commute to work and rents that are manageable. This puts greater demand pressures on housing facilities in the more popular and commercial areas such as South Mumbai and ‘the suburbs’, pushing the prices further up whilst encouraging slum settlements indiscriminately across the city. An important aspect that is often overlooked is the (re)location of maids to smaller slum pockets in more expensive residential areas in order to live closer to their employers. The Government of Maharashtra’s Vision Mumbai aims to make Mumbai a “slum free city” by the year 2015, with only 5 years left on the clock it is unclear how successful the government will be in achieving this. Supporting this skepticism, the Ministry for Housing and Urban Poverty Alleviation itself announced on the 3rd of August 2010 that “The ‘complex and huge’ task of making India slum-free in five years may not be possible.”[16]

Creating housing stock for the EWS and LIG segments

Affordable housing for Economically Weaker Sections (EWS) and Lower Income Groups (LIG), as well as lower Middle Income Groups (MIG) is an important and vitally under-served segment of the housing market. The Government of India’s 10th plan and 11th plan estimates of 24.7 and 26.53 million shortages respectively have shown that 99% of these shortages accrue to the EWS and LIG sections. Hence when addressing affordable housing, we are necessarily working for the benefit of these two groups. Due to the sheer size of this deficit, it is extremely important to asses the Government’s role in providing affordable housing, which entails informed and constructive debates on both data collection and policy.

There is an unequivocal disconnect between the supply of housing and the needs of the poor in the context of Mumbai. However, as there is very little ground level data the magnitude of the gap is not clear, nor are the exact remedial measures known at hand. The Maharashtra Chamber of Housing Industry states that Mumbai has an immediate demand for approximately 1.4 million homes, of which 80 per cent is from the Rs 3-5 lakh income group. Estimates from the Slum Rehabilitation Society (Mumbai) suggest that the demand for affordable housing is around 60-80,000 a year, whereas at the current construction rates only 40,000 or so are being produced and thus the unmet demand for affordable housing continually mounts. There appear to be broad variations in data calculations, which necessarily affect the aims and efficacy of schemes to reduce this gap between supply and demand.

The specific constraints for housing in Mumbai

  • Lack of data and information from a bottom up perspective
  • Land is scarce and the tight control over existing and available land is forcing up prices
  • Tussles between state and centre over control and use of land (e.g. Mill lands)
  • Policies are archaic, ineffective, inappropriate, largely rhetoric and open to being misused
    • FSI is being used as a currency, whereas it was initially intended as a planning tool
    • The market for TDR is controlled by a few players and results in excessively high valuations    
    • The Rent Control Act has frozen the prices at 1994 levels and artificially constricts the supply of housing whilst stifling the rental market and making housing in Mumbai generally illiquid
    • Haphazard repeal of ULCRA
    • Lack of adequate and appropriate Housing Finance
    • Political and Commercial Interests: The Builder-Bureaucrat nexus  
      • Pankaj Kapoor, Managing Director of Liasas Foras, a real estate research firm candidly says “Developers tend to keep prices high and make houses unaffordable. Something should be done to make them sell at affordable rates.” [SOURCE]
      • Eknath Khadse, leader of the opposition exposed the SRA for having “fleeced the government to the tune of Rs. 50,000 crores” through spurious projects. [SOURCE]


The Policy Environment

These problems (evolved both by design and by default) will need to be tackled at their very root, without which there seems no scope for improvement. Fundamentally, the discussion of affordable housing policy keeps coming back to a few key issues:

  • Political will
  • Finance
  • Land
  • Planning and Implementation

How to break the deadlock is the question of the hour. If all the issues that need to be resolved are known, how is it that as a society we are not able to overcome these? We must first believe that a radically better alternative is possible, and most importantly within our reach.

Most people who form the LIG and EWS sections of society cannot afford homes in this city; either they cannot avail of traditional sources of finance such as home loans from formal lending institutions like banks, or they do not have access to housing that they can afford to buy (undersupply), and hence they live in shanty dwellings. Expanding the supply and availability of affordable homes would in theory ease the price tensions and improve the living conditions of thousands of households. Whilst the government talks of affordability in housing in policies such as the National Urban Housing and Habitat Policy (2007), in reality, it appears as if affordability is not actually at the heart of policy implementation. Our interest lies in establishing why this may be the case and what can be done to rectify the situation. To this end, the ORF roundtable discussion on Affordable Housing is just the beginning of our efforts to establish a better understanding of the situation and of the likely possible solutions.

Independent sources speculate that the recent spate of attention that the affordable housing segment has seen is a function of the falling revenues from other sections such as the High Income Housing (HIH) especially as a result of the recent Global Economic Downturn. The increasing attention that the industry is paying to this segment is welcome, however, it is important to evaluate and ensure that these attempts are not merely means of cashing in on an under-served market, whilst waiting for profits in other segments to return. Unfortunately for the buyer, to whom the costs get passed on, the rising costs of land, labour and construction have further inflated the prices of affordable housing. Even some segments of the middle income groups have been priced out of the market, especially the young and first-time buyers. Housing across the city has become a speculator’s game, with a substantial proportion of new and existing flats being unoccupied or rented out by owners who are not even in the country. For the LIG and the EWS who are at the bottom of the heap, this means that they have to rely on either informal housing or illegal occupancy. Our aim to establish whether and to what extent this latest Government of Maharashtra scheme will be successful in easing the burdens in housing supply, and to evaluate that this is not a mere fad or change in policy to keep up with popular rhetoric.

For Mumbai to continue being a buzzing metropolis, the government and industries must keep up with the ever growing needs and aspirations of the city’s population. It is felt that Mumbai as a city, which contributes almost 30 % of fiscal revenue to the Central Government, should be provided adequate funds to maintain a standard of living that is commensurate with the city’s contributions. Showing leadership and foresight in planning will bring about the biggest and most sustainable improvements to slum areas and housing for Mumbai’s citizens. The vision of this study is to see some real efforts towards improving the housing scenario in Mumbai, especially for the poor. 

GoM-MCHI – Latest Initiative – “Homes for All”

The latest scheme, jointly devised by the Government of Maharashtra and the Maharashtra Chamber of Housing Industry (MCHI) ambitiously titled ‘Homes for All’ is of particular interest, being the most recent large scale effort to provide affordable housing in Maharashtra. MCHI, formed in 1982 is the most prominent organisational body representing over 500 members (individuals and companies), who account for providing 80% to 90% of residential accommodation in Mumbai and surrounding areas in Maharashtra. On the 28th of April 2010 Chief Minister Ashok Chavan (GoM) and the President of MCHI Pravin Doshi signed an MOU committing the MCHI members to building five lakh affordable houses in the next five years. The broad and bold aim of this initiative is to promote sustainable and inclusive development in Mumbai by providing affordable housing to all by 2015. At present, it is not clear as to whether these 5 Lakh houses will go towards counting for the GoM’s target of 10 Lakh homes in the coming 10 years, whether this will also count towards MMRDA’s targets for rental housing, and to what extent MHADA and other government organisations dealing with Housing will be involved.

The precise locations of the developments have also not yet been specified, but initial news reports suggest that projects would be located in Thane and surrounding areas. The initial prices quoted for these affordable homes are between Rs. 3 – 7 Lahks and from Rs. 750 upwards (monthly) for MMRDA’s affordable rental housing component. A recent article in the Indian Express (29th July 2010) highlights how after 60 days the government and MCHI have made no progress on a number of the details of this plan despite having publically set themselves this deadline. Some critical questions we would like to address are, whether the government’s new joint partnership with the private sector will fulfill the real affordability criteria of those who this latest scheme is intended to benefit – those who need this housing the most. Importantly, have the government and MCHI incorporated enough of the best-practices and internalized proper mechanisms of checks and balances to ensure that the scheme is efficient, equitable and effective? Finally, how will this initiative affect the housing market in Mumbai as a whole and what social improvements/changes will this policy bring about? We would like for this latest initiative to yield positive results for the intended beneficiaries and to this end we aim to provide analysis that may help in guiding the scheme in the right direction, so that it may be sustainable and not repeat mistakes of the past.

As a public policy think tank that believes and engages in research for policy advocacy, we feel that substantially more hard evidence and data is needed for suitable and successful policy making. In our own small way, the Observer Research Foundation would like to study this important issue and create a platform for meaningful discussion and deliberation to help the city move upwards from the status quo. To this end, ORF has organized a roundtable conference on Saturday, 7th August 2010, to engage a diverse set of stakeholders including government officials, members of the real estate industry, NGOs and housing activists, as well as consultants and end users. ORF will produce a report of the discussions and compile the recommendations for wider circulation, and will continue its engagement with this topic through further studies and debates. Whilst we acknowledge that our efforts will only play a minor role in this process, we hope that our contributions will reinvigorate the debate and provide some useful information and facilitate a more effective set of policies.


For further information about this paper please contact Varsha Raj at

[1] “Slum Improvement and development schemes and policies,” Talk at the National Consultation organised by NAPM, TISS, HRLN, and CRH at YUVA centre, Khargarh, Das, October 2005, Pg. 2

[2] UN Declaration of Human Rights (1947) :

[3] UN Declaration of Human Rights (1947) :

[4] Constitution of India (1947) :




[8] Affordable Housing Guidelines:

[9] Based on the report submitted by the Deepak Parekh Task Force


[11] Urban poor increasingly made homeless in India’s drive for more ‘beautiful’ cities –

[12] Real estate price trends in Mumbai and its suburbs – 

[13] The Ochre Mountain – Residential prices in NCR, Mumbai soar –

[14] ibid

[15] ibid

[16] Difficult to make India slum-free in five years: MoHUPA


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This entry was posted on 07/08/2010 by in Urban Renewal and tagged , , , , , .
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