Affordable Housing Crisis: Can Budget 2025 Introduce Land Pooling Reforms?

Affordable housing in India faces a dual crisis—escalating land costs and an acute shortage of urban land for development.

As urbanization accelerates, with an estimated 120 million Indians moving to cities by 2030 (Anarock Research, 2024), the gap between housing supply and demand continues to widen.

This issue is compounded by the lack of available land parcels for large-scale affordable housing projects, pushing developers to focus on high-margin luxury and premium projects instead.

The government has introduced various initiatives like Pradhan Mantri Awas Yojana (PMAY) to address this issue, yet challenges persist. In 2024, only 52% of the target 11.2 million urban homes under PMAY were completed, according to a Ministry of Housing and Urban Affairs report.

With the Indian real estate market projected to grow to $5.8 trillion by 2047 (CREDAI-Knight Frank report, 2024), the focus must shift towards long-term structural reforms to unlock the potential of affordable housing.

One such reform is land pooling, which offers an innovative way to aggregate land for housing and urban development.

If introduced effectively in Budget 2025, this policy could revolutionize urban development, mitigate the affordable housing crisis, and spur growth across the real estate sector.

1. Land Pooling as a Catalyst for Urban-Rural Integration

Land pooling is not a new concept, but its implementation in India has been sporadic and region-specific.

A prime example is Delhi’s Land Pooling Policy, which aimed to create 17 lakh housing units. Yet, as of 2024, only 10% of the planned projects had taken off due to bureaucratic hurdles and a lack of incentives for landowners (Delhi Development Authority, 2024).

The integration of urban and rural landholdings through land pooling can play a transformative role in expanding affordable housing.

By aggregating land parcels from individual landowners, providing them with equitable compensation or a share of the developed land, and reallocating it for infrastructure and housing, the policy bridges the gap between urban development and rural livelihoods.

For instance, peri-urban areas near Tier-II cities like Indore and Lucknow are well-suited for such initiatives, where land prices remain relatively affordable.

Moreover, the adoption of such policies could align with the Make in India initiative, which seeks to boost manufacturing and create employment hubs.

Industrial and warehousing sectors, which received $2.5 billion in investments in 2024 (Colliers India), are ideal complements to affordable housing projects in these regions. By strategically locating land pooling zones near industrial hubs, these areas can offer live-work-play environments, fostering sustainable urban growth. 

2. Innovative Financing Models for Land Pooling Projects

One of the key barriers to land pooling is the lack of financing models tailored to such projects.

In 2024, institutional funding in real estate surpassed $8.9 billion, with 66% of inflows driven by foreign investments (JLL India). However, affordable housing continues to attract limited private equity, owing to slim margins and high risks.

To address this, Budget 2025 must introduce financial instruments specifically designed for land pooling and affordable housing.

Municipal bonds, which have seen a resurgence in recent years, could be deployed to fund infrastructure in land pooling zones. For instance, cities like Pune and Ahmedabad have already raised significant capital through municipal bonds for urban infrastructure.

Another approach could involve green financing. With India committing to net-zero emissions by 2070, green bonds could fund sustainable affordable housing projects.

These bonds, when tied to land pooling initiatives, can attract Environment, Social, and Governance (ESG)-focused investors. According to SEBI, India issued $13 billion worth of green bonds in 2024, a figure that could grow significantly with supportive policies.

Furthermore, Public-Private Partnerships (PPPs) could provide much-needed liquidity for such projects.

By sharing risks and rewards, these partnerships can ensure timely completion and reduce the financial burden on both the government and developers, making affordable housing an attractive investment.

 3. Smart Zoning for Optimized Land Utilization

Zoning regulations are critical for the success of land pooling projects. Traditional zoning methods often limit land use efficiency, resulting in haphazard urban sprawl and underutilized infrastructure.

As of 2024, India had over 40 million urban slum dwellers, a figure that underscores the need for better zoning practices to support inclusive urbanization (National Sample Survey Office, 2024).

Smart zoning policies can optimize land utilization by promoting mixed-use development in land pooling zones.

For instance, allocating 40% of pooled land for housing, 30% for commercial activities, and the remainder for green spaces and infrastructure ensures balanced growth. Such models have been successfully implemented in countries like Japan, where compact urban designs enhance livability and reduce commuting times.

Additionally, smart zoning can prioritize transit-oriented development (TOD). Cities like Bengaluru and Hyderabad, which are expanding their metro networks, present ideal opportunities for TOD-based land pooling.

By clustering affordable housing near transit hubs, these projects can reduce travel costs for residents and enhance urban connectivity.

To ensure transparency and accountability, digital platforms using Geographic Information System (GIS) mapping should be integrated into zoning processes. GIS tools can provide real-time insights into land availability, infrastructure gaps, and demographic trends, enabling data-driven planning and execution.

 4. Incentivizing Private Developers for Affordable Housing in Land Pooling Zones

Private developers have traditionally shied away from affordable housing due to low profit margins.

However, with the right incentives, their participation in land pooling projects can be significantly increased. In 2024, the share of affordable housing in total real estate sales dropped to 14% from 18% in 2023, reflecting the growing preference for high-margin luxury projects (Anarock Research, 2024).

To reverse this trend, Budget 2025 should offer tax incentives and streamlined approval processes for developers engaging in affordable housing within land pooling zones. For instance, tax breaks on input materials like cement and steel, which are currently taxed at 18% and 28%, respectively, can lower construction costs.

Additionally, the reintroduction of the Credit-Linked Subsidy Scheme (CLSS) under PMAY could boost demand for affordable housing.

Between 2015 and 2024, CLSS benefited over 10 million families, yet its discontinuation in 2024 has slowed momentum in this segment (Ministry of Housing and Urban Affairs). Reinstating the scheme with updated criteria could attract both developers and buyers.

Single-window clearance systems are another crucial measure. Delays in project approvals cost developers an average of 8-12% in additional expenses, as per a CREDAI report.

By fast-tracking approvals for projects in land pooling zones, the government can create a favorable business environment for developers while ensuring timely project completion.

5. Using Technology for Transparent Land Pooling Execution

Technology is a game-changer for the real estate sector, and its integration into land pooling reforms could ensure transparency and efficiency.

Blockchain technology, for instance, can be used to digitize land records and facilitate tamper-proof transactions. According to NASSCOM, blockchain adoption in India’s real estate sector could reduce disputes over land ownership by 70% (NASSCOM, 2024).

Artificial Intelligence (AI) can further streamline processes by predicting demand patterns and optimizing resource allocation. For example, AI-powered tools can analyze urban growth trends to identify the most viable locations for land pooling projects.

Moreover, online portals with real-time updates on project progress can enhance stakeholder confidence.

Platforms similar to the Real Estate Regulatory Authority (RERA) could be introduced specifically for land pooling zones, providing landowners, developers, and buyers with access to critical information.

Digital Twin technology, which creates virtual replicas of physical assets, could also be deployed to simulate project outcomes before execution.

This technology has been successfully used in Singapore’s urban planning efforts and could be adapted to India’s context to minimize risks and maximize efficiency.

 To Conclude...

The affordable housing crisis is not just a challenge but an opportunity for transformative change in India’s real estate sector.

By introducing land pooling reforms in Budget 2025, the government can unlock vast tracts of underutilized land, foster inclusive urban development, and create a robust ecosystem for affordable housing.

From innovative financing models and smart zoning policies to incentivizing private developers and leveraging cutting-edge technology, the roadmap is clear.

However, success will depend on the government’s ability to address execution challenges and build consensus among stakeholders.

As the real estate industry awaits Budget 2025 with high expectations, the question remains: Will this budget pave the way for a sustainable and inclusive future for affordable housing in India?