Why is your house rent so high?

Rent depends on where a resident chooses to live in the city. The search for decent, affordable housing, though, keeps pushing city residents further towards the outskirts. In India’s metropolitan regions, that search pushes people to Sonepat or Noida in the National Capital Region, to Yellahanka in Bengaluru, or to Khopoli near Mumbai.

Planners sort housing into three groups by income level: lower-income group (LIG), middle-income group (MIG), and higher-income group (HIG). Housing counts as affordable, by the standard definition, only when a household spends no more than a third of its income on it.

By that definition, [X]% of city residents in India lack access to affordable housing, and rents are high across all income groups.

Housing prices and the monthly rent that follows them emerge where housing supply meets housing demand. Demand for affordable housing has risen fast in Indian cities, and indeed across every lower- and middle-income country in the world. India will soon house more than half its population in cities, and because incomes there remain low, cities need a much larger stock of LIG and MIG housing.

Supply is not catching up with that demand, for three visible reasons.

Builders lack the incentive to build LIG and MIG housing. Construction in India costs builders dearly, since they must navigate a mix of complex regulations, licensing requirements, limited access to credit markets, uncertain land titles, and court battles just to finish a project on time. Luxury housing for buyers who can absorb these costs is the only route builders find to a profit. Restrictions that keep buildings from growing taller add to this problem too.

Many owners, meanwhile, prefer to keep their houses locked and vacant. They treat housing as an investment that absorbs liquid cash and promises high future returns, and renting a unit out risks losing possession to an illegitimate occupant. India’s safeguards, insurance, and monitoring against that risk remain weak, so owners hold units empty rather than rent them, and the supply of already-built housing shrinks further.

Rent control laws create a further difficulty. India’s legacy rent laws fixed prices decades ago, sometimes as low as ₹50 a month, and those fixed rents fetch owners no return today. Owners have abandoned such buildings to tenants too poor to maintain them, and nobody can sell the buildings to make way for better ones, since the tenancy locks the land in place. These abandoned units still occupy some of the most valuable ground in Indian cities, notably in Kolkata and Mumbai.

Other reasons exist, but one cause connects them all: India’s housing market is not free. Builders cannot easily build, buyers cannot easily buy, and owners cannot easily sell, and each blockage keeps supply from meeting demand and keeps affordable housing prices high.

The consequence falls on families: poor, overcrowded housing that still consumes a large share of household income.