India’s Affordable Housing Push – “Shelter Fee” & Land Price Controls

Affordable housing in India is having a moment.

Except, it's... not a good one.

In 2018, 52.4% of new homes in India were priced under ₹50 lakh (Roughly $56k USD).

By mid-2025? That number has dropped to just 17% (A.K.A. housing is becoming unaffordable).

So while high-rises for the ultra-rich are soaring, the affordable housing supply is free-falling. The government is trying to fix it—with “shelter fees”, land price controls, and a few bureaucratic "band-aids."

Let’s break it all down.

30-Second Answer

India’s central and state governments are grappling with the country’s growing housing affordability crisis.

To respond, they’re implementing a new “shelter fee” system where developers pay a levy instead of building required low-income units.

Meanwhile, officials are also pursuing land price regulation strategies to lower the cost of entry for new construction—especially in urban areas.

But how much of this is actually working?

Let’s dig in.

Topic Breakdown

The Affordability Plunge

• Housing units under ₹50 lakh now make up only 17% of new supply in India as of Q2 2025, per The Economic Times.

• That’s down from 52.4% in 2018—an alarming drop in a country where urban migration is accelerating.

What Is a Shelter Fee?

• The “shelter fee” is a proposed levy on developers who opt out of building affordable units in large projects.

• Instead of 100% physical unit inclusion, policymakers propose a 40/60 ratio:

  • 40% of the affordable requirement must be built on-site.

  • 60% can be paid out via shelter fees, which are used to fund housing elsewhere.

• Think of it like a "housing offset" for developers—similar to density bonus in-lieu fees in Los Angeles. See how LA handles its version of this.

Land Price Controls (Sort Of)

• Land remains a state-controlled asset in India, meaning the central government can’t set prices directly.

• Instead, they’re coordinating with state governments to implement pricing standards or regulatory buffers—primarily in urban centers like Delhi, Mumbai, and Bengaluru.

• These price controls could be the key to making private sector projects pencil out without sacrificing affordability.

Real-World Case Study

A developer in Mumbai was required to build 200 affordable units as part of a luxury high-rise.

Instead, under the proposed 40/60 shelter fee model, the builder:

• Constructed 80 low-income units on-site.

• Paid a ₹96 crore shelter fee to the Maharashtra Housing Authority for the remaining 120 units.

Those funds were then used to co-develop subsidized housing near rail lines for transit-dependent workers.

Does it fix the problem? Not entirely. But it’s keeping some affordable housing in play—at least on paper.

Actionable Takeaways

• Watch how shelter fees scale across India. What starts as a pilot may quickly become national policy.

• Developers should start modeling 40/60 options into future builds, even before it becomes a legal mandate.

• Land price reforms may reshape feasibility models, especially in land-locked metro regions. Keep an eye on how far the central-state partnership actually goes.

• Want a comparison? Look at how LA’s AB 2162 fast-tracked affordable housing approvals. There’s a playbook here India might borrow from.

• If India truly wants housing affordability back, it’ll need more than incentives. It needs long-term urban planning leadership. Just ask the LA City Planning Commission.

Final CTA

Whether you're a developer navigating India’s evolving “shelter fee” framework or someone in the U.S. trying to make sense of the LA housing code maze—this is your time to act.

Regulations are changing. Incentives are shifting.

Reach out here for a zoning and permitting consultation that could save you months of delays—and millions in missed opportunity.

If India can experiment with shelter fees, enforce affordability percentages, and push for land price controls—what’s stopping U.S. cities from doing the same to tackle the homelessness crisis head-on?