Relevance of Subsidies in Indian Housing Markets

Abstract

India is the second largest developing economy in the world and is still expanding on its infrastructure base. One of the key sectors of investment is the real estate sector that addresses the basic necessities of a shelter and is guided by the thriving housing markets. Various studies conducted to understand the nature of market dynamics reveal that the housing demand is the highest in the LIG and EWS sections of the society. In order to meet up with the increasing pressure, the government has experimented with a range of approaches in policy-making. One of them is subsidizing housing for the lower income groups through techno-legal instruments. This paper examines the evolvement of the subsidy component over the years and the modalities associated with it. Based on theoretical evidences and qualitative assessment, it attempts to uncover the missing links between the devised mechanisms and their relevance to cater to the existing gaps. A comprehensive analysis shows that the subsidy policies are targeted towards the urban poor but not the informal shelter typologies that form a significant share of urban housing systems. Moreover, there is a lack of regulating the credit flow systems and inattention towards demand-side interventions. The author argues that it is imperative to increase ‘bankability’ of the informal sector and encourage periodic examinations to assess relevance of subsidies in Indian housing markets through seeking active participation from the local communities.