Government Policies for Housing the Urban Poor in India

Cities in India have always been magnets for opportunity, but for millions of urban poor families, the dream of a secure roof remains elusive. Over the decades, successive governments have rolled out a long list of housing schemes, slum policies, and habitat missions aimed at the Economically Weaker Sections (EWS). Some succeeded in giving families a pucca address; many got stuck in red tape, land disputes, or simply ran out of money. Understanding this policy journey, from the Nehruvian planning era to today’s Pradhan Mantri Awas Yojana, helps explain why housing for the urban poor is still one of the country’s most stubborn development challenges.

The post-independence beginning: 1950s and the first plans 🔗

When India gained independence, cities were already strained. Partition had pushed millions of refugees into urban centres, and industrial towns were swelling with migrant workers. The First Five Year Plan (1951-56) treated housing as a social need and laid down the institutional foundations of state-led housing. The Ministry of Works and Housing, the National Buildings Organisation, the Town and Country Planning Organisation, and state-level Housing Boards were all created in this period to plan, finance, and build housing for the working classes.

The Plan also launched the country’s two earliest urban housing schemes: the Subsidised Industrial Housing Scheme and the Low Income Group (LIG) Housing Scheme. According to the Planning Commission, the period of the First Plan witnessed the first steps in a national housing programme that would assume growing importance in future plans, including a subsidised industrial housing scheme and a low income group housing scheme. Housing schemes for plantation labour and for labour in coal and mica mines were also implemented as part of the programme.

The Second Plan and the widening of schemes 🔗

The Second Plan (1956-61) broadened the housing programme considerably. The Industrial Housing Scheme was extended to cover all industrial workers, and three new schemes were introduced: Rural Housing, Slum Clearance, and Sweepers’ Housing. A Middle Income Group Housing Scheme was also added. The Slum Areas (Improvement and Clearance) Act of 1956 provided the legislative backbone for what came next, treating slums largely as “urban blights” to be cleared and redeveloped rather than as functioning communities to be improved.

The 1960s and 70s: from clearance to improvement 🔗

By the early 1960s, it was clear that demolishing slums and rehousing families was both expensive and socially disruptive. Cities continued to grow, and the backlog of poor housing kept widening. The policy emphasis began to shift, slowly, from clearance to improvement. The Indian Institute for Human Settlements notes that under the Slum Improvement Scheme, the government provided a 50 per cent loan and 37.5 per cent central subsidy to states for upgrading slum areas, with state governments contributing the rest.

In 1972, the central government launched the Environmental Improvement of Urban Slums (EIUS) scheme. Instead of bulldozing settlements, EIUS aimed to provide basic services such as water taps, drainage, paved lanes, community latrines, and street lighting. As the Citizens for Justice and Peace records, these “self-help” schemes drew on the ideas of John Turner and others, who argued that the urban poor themselves were the most efficient builders of their own homes when given secure land and basic infrastructure.

HUDCO and the institutional turn 🔗

An equally important development of this period was the creation of the Housing and Urban Development Corporation (HUDCO) in 1970. HUDCO became the chief financier of housing for EWS and LIG households through state housing boards and improvement trusts. Over the following decades, HUDCO and later the National Housing Bank (set up in 1988) would anchor the institutional ecosystem for low-income housing finance in the country.

The 1980s: rethinking the urban poor 🔗

By the early 1980s, the share of the urban population living in slums had grown sharply, and the rural housing focus of earlier plans no longer matched the on-ground reality. In 1985, the Urban Basic Services (UBS) programme was launched, jointly supported by UNICEF, to deliver an integrated package of health, education, women’s empowerment, and sanitation to slum communities. This evolved into the Urban Basic Services for the Poor (UBSP) in 1990, which built on community organisation and convergence of services.

The Charles Correa-headed National Commission on Urbanisation submitted its landmark report in 1988, stressing the importance of informal sector housing and arguing that urban poverty needed the same policy attention as rural poverty. This thinking fed directly into the country’s first National Housing Policy of 1988, which set out an enabling role for government, with greater participation from cooperatives, the private sector, and individuals.

Shifting to a facilitator state 🔗

This decade marked a quiet but decisive shift. The state began to step back from being the direct builder of houses and started positioning itself as a facilitator. Land assembly, finance, and regulatory reform would now be its primary contributions; actual construction would increasingly be left to households, cooperatives, and private developers.

The 1990s: liberalisation and a new housing policy 🔗

Economic liberalisation in 1991 reshaped urban policy too. Government resources alone could not finance the growing housing gap, and so private capital and markets were brought to the centre of the strategy. A revised National Housing Policy was announced in 1994, followed by the much more comprehensive National Housing and Habitat Policy (NHHP) of 1998.

According to the National Housing Bank, the 1998 policy aimed at creating surpluses in housing stock either on a rental or ownership basis, set a target of two million additional houses per year with emphasis on the poor and deprived, and envisaged the setting up of a National Shelter Fund to meet the low-cost funding needs of the poor. It explicitly redefined the government’s role as that of a facilitator and enabler rather than a provider, encouraging the private sector to take up land assembly, construction, and infrastructure investment.

Alongside the NHHP, the 1990s also saw scheme-level innovations such as the National Slum Development Programme (NSDP) in 1996, which provided central additional assistance to states for slum improvement, and the Two Million Housing Programme, with seven lakh urban houses targeted each year.

The 2000s and beyond: missions, slums, and Housing for All 🔗

The post-2000 phase scaled up urban interventions into “mission-mode” programmes. In 2001, the Valmiki Ambedkar Awas Yojana (VAMBAY) was launched to provide shelter and upgrade existing housing for slum dwellers below the poverty line. In 2005, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) bundled urban infrastructure with two pro-poor sub-missions, Basic Services for the Urban Poor (BSUP) for large mission cities and the Integrated Housing and Slum Development Programme (IHSDP) for smaller towns. The IHSDP itself absorbed the earlier VAMBAY and NSDP schemes.

The 2007 National Urban Housing and Habitat Policy (NUHHP) followed, focusing exclusively on urban areas for the first time and pushing public-private partnerships in affordable housing. In 2009, the Rajiv Awas Yojana (RAY) was announced with the explicit goal of a “slum-free India”, combining property rights for slum dwellers with redevelopment in partnership with the private sector.

Pradhan Mantri Awas Yojana – Urban (PMAY-U) 🔗

In 2015, the government launched the Pradhan Mantri Awas Yojana (Urban) as the flagship mission to provide a pucca house with basic amenities to every eligible urban household. PMAY-U operates through four verticals: In-Situ Slum Redevelopment (ISSR) using land as a resource, Affordable Housing in Partnership (AHP) with public and private developers, the Credit-Linked Subsidy Scheme (CLSS) for home loans, and Beneficiary-Led Construction (BLC) for individual EWS landowners.

According to the Centre for Social and Economic Progress, PMAY-U has sanctioned around 11.9 million houses since 2015, roughly 10 per cent of the country’s Census 2011 urban housing stock. PMAY-U 2.0, launched in 2024, targets one crore additional houses for urban poor and middle-income families over five years.

Why implementation keeps stumbling 🔗

For all this ambition, a stubborn gap remains between policy on paper and homes on the ground. Several structural challenges recur across decades.

Inadequate and patchy funding 🔗

Housing the urban poor is capital-intensive, and central subsidies rarely cover the full cost of construction or land. State governments and urban local bodies (ULBs) are expected to fill the gap, but most ULBs have weak revenue bases. The Standing Committee on Housing and Urban Affairs noted that even basic amenities such as water, sanitation, and electricity in PMAY-U houses have often been delayed because ULBs lack resources to extend trunk infrastructure to project sites.

Land, the missing ingredient 🔗

Urban land is scarce, expensive, and tangled in unclear titles. Most slums sit on encroached public or private land, which complicates both redevelopment and resettlement. The IMPRI Impact and Policy Research Institute points out that the In-Situ Slum Redevelopment vertical of PMAY-U has had limited uptake precisely because of land ownership disputes and the difficulty of attracting private capital to slum sites.

Bureaucratic delays and weak coordination 🔗

Indian housing involves a dense thicket of agencies: the central ministry, state housing boards, development authorities, ULBs, slum boards, parastatals like HUDCO, and private developers. Coordination among them is often poor, sanctions get held up, and projects slip across financial years. Analyses of PMAY-U repeatedly flag delays in construction, institutional fragmentation, financial bottlenecks, and inconsistent quality of construction as core constraints.

The mismatch with how the poor actually live 🔗

Many housing schemes were built around the assumption that urban poor families want, and can afford, ownership of a single-family flat in a peripheral location. In practice, large numbers of urban poor are migrants who need affordable rental housing close to their work, not a 30 sq metre flat 25 kilometres away. Resettlement colonies often see high vacancy rates because residents cannot give up their livelihoods to live there. This persistent mismatch is one reason policy is now slowly moving towards rental housing for industrial workers and migrants.

Targeting and exclusion 🔗

The poorest of the urban poor, pavement dwellers, the homeless, and tenants in informal slums often lack the documents required to qualify for housing benefits. Beneficiary identification still leans heavily on land ownership and formal proofs, which excludes precisely the people who need housing most.

What this long policy journey tells us 🔗

From slum clearance in the 1950s to in-situ redevelopment today, India’s housing policy for the urban poor has moved through three broad phases: the state as builder in the early plans, the state as improver of existing slums from the 1970s, and the state as facilitator of markets, finance, and partnerships from the 1990s onwards. Each shift was a response to fiscal limits, population pressure, and lessons learned from earlier failures.

What has not changed is the scale of the challenge. Urban India is still adding millions of new residents every year, the housing shortage among EWS and LIG households runs into tens of millions, and land prices in cities continue to push the poor to the margins. Policies that worked on paper have stumbled on land, money, and coordination. The next phase of reform will likely need to combine ownership schemes like PMAY-U with serious investment in rental housing, secure tenure for slum dwellers, and stronger municipal capacity.

What do you think? Should India’s urban housing policy continue to focus on ownership for the poor, or is it time to put rental housing for migrants and informal workers at the centre? And how would you redesign the system so that the most vulnerable, the homeless and pavement dwellers, are no longer left out of every scheme on paper?

References

1. https://www.nhb.org.in/publications_post/the-national-housing-habitat-policy-1998-an-overview/
2. http://planningcommission.nic.in/plans/planrel/fiveyr/2nd/2planch26.html
3. https://iihs.co.in/knowledge-gateway/wp-content/uploads/2017/07/Low-Income-Housing.pdf
4. https://cjp.org.in/indias-housing-crisis-how-the-poor-always-get-a-raw-deal/
5. https://www.india.gov.in/housing-all-scheme
6. https://csep.org/working-paper/deconstructing-pmay-u-what-the-numbers-reveal/
7. https://prsindia.org/policy/report-summaries/evaluation-of-implementation-of-pmay-urban
8. https://www.impriindia.com/insights/pradhan-mantri-awas-yojana-urban-pmayu/
9. https://www.researchgate.net/publication/398416952_Pradhan_Mantri_Awas_Yojana-Urban_PMAY-U_A_Comprehensive_Review_of_Progress_Implementation_Challenges_and_Future_Directions_for_Affordable_Housing_in_India