India's Housing Sector Poised for Major Overhaul Driven by Urbanization and Policy Reforms

New Delhi: India's housing and urban development sector is poised for a decisive transformation, as rapid urbanisation, infrastructure expansion and policy reforms converge to shape the next phase of growth, according to a recent report by KPMG.

With the urban population projected to reach around 40 per cent by 2036 and nearly half of India expected to live in cities by 2050, the choices made today in housing, planning and financing will significantly influence the trajectory towards Viksit Bharat 2047.

The report suggested that the real estate sector is increasingly being viewed not just as a growth indicator, but as a structural driver of economic expansion, job creation and urban liveability.

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A key priority emerging from the discourse is the need to unlock affordable housing supply, particularly for Economically Weaker Sections (EWS) and Low-Income Groups (LIG). Structural constraints such as rising land costs, approval delays, fragmented regulatory processes and limited financial access continue to constrain viable project delivery in this segment.

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The report highlights the importance of targeted interventions, including higher floor area ratio (FAR) for affordable projects, streamlined approvals through single-window systems, digitised land mapping and reduced development charges to improve project feasibility. Strengthening last-mile infrastructure and aligning master plans with real-time urban growth patterns are also seen as essential enablers.

Alongside ownership housing, rental housing is emerging as a critical pillar of urban policy. The sector currently remains fragmented and largely informal, with low institutional participation and limited yield attractiveness for investors.

The report suggests that rental housing can be formalised into a structured asset class through measures such as GST rationalisation, inclusion under priority sector lending, conversion of vacant housing stock into rental assets, and development of co-living and segment-specific housing models for students, workers and senior citizens. Adoption of Affordable Rental Housing frameworks and public asset monetisation is expected to significantly expand supply.

Equally important is strengthening trust and efficiency within the regulatory ecosystem, particularly the interface between the Real Estate (Regulation and Development) Act (RERA) and the Insolvency and Bankruptcy Code (IBC). Key recommendations include early stress detection systems, digital integration of quarterly progress reports, project-wise insolvency resolution mechanisms and improved coordination between RERA authorities and insolvency professionals. These reforms aim to prioritise project completion, safeguard homebuyer interests and reduce systemic uncertainty.

The report noted that India's urban transformation will depend on execution-driven reforms, stronger institutional frameworks and deeper public-private collaboration. A balanced focus on affordability, rental ecosystem development and regulatory resilience is expected to define the next phase of sustainable urban growth.