Why Floor Space Index Won’t Fix India’s Housing Crisis: Govt Official’s Shocking Warning

Increasing Floor Space Index (FSI) alone won’t solve India’s housing shortage; a comprehensive policy mix involving land availability, planning regulations, and economic incentives is essential, said Kuldip Narayan, Joint Secretary, Ministry of Housing and Urban Affairs (MoHUA).

FSI Alone Won’t Solve Housing Crisis

FSI is the ratio of a building’s total built-up floor area to the plot’s area. It is a critical urban planning tool set by local authorities that defines the maximum construction extent on a plot of land. A higher FSI allows for more construction, increasing density and potential development, while a lower FSI promotes lower-density development and more open spaces.

Speaking at an event organised by realtors’ body NAREDCO in the national capital, Narayan observed that while higher FSI may work in land-constrained cities where vertical development is inevitable, it is only one part of the larger solution.

He noted that the housing deficit is largely driven by the opportunity cost of land, rather than construction costs, especially in metropolitan cities, where speculation has driven up prices.

To address this, the Joint Secretary proposed a compliance framework that requires large residential townships and commercial projects exceeding a certain threshold to allocate a share of their development to affordable housing.

Developers, Narayan said, could fulfil this obligation by constructing units within the same project, delivering them in another project within a one to six-kilometre radius, or purchasing Affordable Housing Transferable Development Rights (TDR) from other developers.

Developers Must Pay ‘Shelter Fees’ for Affordable Housing

He said if none of these options are viable, developers should contribute through a shelter fee determined by local authorities. At least 40 per cent of the obligation, he recommended, should be met through actual construction, while the remaining 60 per cent can be settled through shelter fees. This blended approach would ensure a steady supply of physical housing while offering developers flexibility.

Highlighting the significance of location, Narayan stressed that affordable housing projects must be situated near metro corridors and transit hubs. Pushing low-income households to city peripheries, he warned, diminishes livability and restricts access to jobs.

Speaking on the occasion, Debasish Prusty, Principal Secretary, Urban Development & Housing Department, Government of Rajasthan, said that affordable housing projects in the state are progressing in the right spirit owing to three clear policy interventions–timely approval of building plans, streamlined regulatory practices, and financial facilitation–backed by strong political will.

Prusty added that Rajasthan continues to upgrade its policies in line with evolving sectoral needs and is actively encouraging private sector innovation alongside government developers to optimise land use and layout planning.

Closing the session, the Joint Secretary said that coordinated efforts between the central and state governments and private developers, combined with inclusionary policies, TDR mechanisms, and shelter fee regulations, are essential to create a sustainable pipeline of affordable housing across India. (Inputs from ANI)

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