How India Supports Housing for the Economically Weaker Sections: Key Initiatives

India’s cities have always struggled to house the people who keep them running. Construction workers, domestic helpers, street vendors, and daily-wage labourers form the backbone of urban economies, yet they are often the least able to afford a roof over their heads. To bridge this gap, the government has rolled out a long line of housing measures for the Economically Weaker Sections (EWS) and Low-Income Groups (LIG) over the past seven decades. These efforts have evolved from bulldozing slums to financing homes, and understanding this journey is essential for anyone studying urban poverty and policy. This post traces the key initiatives, how they changed over time, and why the housing problem still refuses to go away.

Early measures from the 1950s to the 1980s 🔗

When India became independent, cities were already overcrowded with migrants seeking work. The earliest housing responses were rooted in two ideas: clearing slums seen as unfit for living, and building subsidised homes for the poor. The First Five-Year Plan recognised urban housing shortages early on, and schemes like the 1952 Subsidised Housing Scheme and the 1954 Low Income Housing Scheme offered loans and subsidies to industrial workers and weaker sections.

The Slum Areas (Improvement and Clearance) Act, 1956 🔗

This was the first major legal tool aimed at slums. The Slum Areas (Improvement and Clearance) Act of 1956 was passed to provide for the improvement and clearance of slum areas in certain Union Territories and to protect tenants there from eviction. It empowered “competent authorities” to declare areas as slums, acquire land, and either improve or demolish structures deemed unfit for human habitation. The Act gave the government strong powers, including the ability to acquire land and relocate residents to new settlements with basic amenities.

The thinking at the time leaned heavily towards demolition and relocation. The accompanying Slum Clearance Scheme of 1956 financed the demolition of slums and the rehabilitation of residents into government-built tenements at nominal rents. While this cleared some unsanitary pockets, the approach often generated resentment because relocation pushed the poor far from their jobs.

Environmental Improvement of Urban Slums, 1972 🔗

By the early 1970s, policymakers realised that knocking down homes was neither humane nor practical. The focus shifted towards in-situ improvement, which means upgrading services within existing settlements instead of clearing them. The Environmental Improvement of Urban Slums (EIUS) scheme was launched in 1972 to provide essential services like water supply, sewerage, drainage, and street paving, starting with a handful of cities and gradually expanding. This reflected a growing recognition that improving living conditions was more sustainable than mass demolition.

The scheme was financed on a per-capita basis. Initially in 1972 the amount was fixed at a modest figure per person, later revised upwards as costs rose. EIUS marked an important philosophical turn: the slum dweller was no longer just someone to be moved, but a citizen entitled to basic civic services.

HUDCO and the financing turn 🔗

One of the most consequential decisions of this era was the creation of the Housing and Urban Development Corporation (HUDCO) in 1970. Operating with the motto “Profitability with Social Justice,” HUDCO was set up to finance housing and urban infrastructure, with a deliberate focus on EWS and LIG households. The organisation gave loans to state housing boards and weaker-section borrowers at subsidised interest rates, channelling money into low-cost housing colonies across the country.

HUDCO’s importance grew steadily. According to its own charter, the vast majority of residential units it sanctions are meant for EWS and LIG clients, and it has channelled cumulative loan assistance worth lakhs of crores into thousands of projects. The 1980s also saw the dedicated EWS Housing Scheme (1980) and the Urban Basic Services Scheme (1986), which folded in international support from agencies like UNICEF.

Urban Basic Services for the Poor (UBSP) 🔗

The Urban Basic Services programme, launched during the Seventh Plan period, took an integrated approach by combining the central government, state governments, local bodies, and UNICEF in a three-tier structure. In 1990, the guidelines were modified and the scheme was renamed Urban Basic Services for the Poor (UBSP), now with full central funding. Its objective was to deliver social services such as mother and child health care, primary education, adult literacy, and nutrition, while neighbourhood committees of beneficiaries were formed to encourage community participation and self-management.

Recent initiatives from the 1990s to the 2000s 🔗

Economic liberalisation in 1991 reshaped housing policy. The emphasis moved away from the government directly building houses and towards enabling markets, providing finance, and partnering with the private sector. This was the period when housing policy became more structured through formal national statements.

National Housing Policy and its successors 🔗

India’s first National Housing Policy was formulated in 1988, followed by revised versions in 1994 and 1998, and later the National Urban Housing and Habitat Policy of 2007. These policies repositioned the state as a “facilitator” rather than a “provider.” The government’s role became one of arranging land, finance, and infrastructure, while encouraging private builders and cooperatives to construct homes. The 1998 policy and the Two Million Housing Programme launched around the same time set ambitious targets for annual housing construction, with a strong rural and urban EWS focus.

The 2007 policy formalised an important rule: a portion of land and floor area in housing schemes should be reserved for social housing for weaker sections. This idea of mandatory EWS reservation in private projects became a recurring feature of later urban planning norms.

Rajiv Awas Yojana 🔗

Launched in 2011, the Rajiv Awas Yojana (RAY) envisioned a “Slum-Free India” in which every citizen would have access to basic civic infrastructure, social amenities, and decent shelter. Unlike the demolition-first thinking of the 1950s, RAY tried to bring slums into the formal system by granting property rights and redeveloping settlements in place wherever possible.

RAY came with concrete financial commitments. Under its Affordable Housing in Partnership component, the central government offered assistance per dwelling unit for EWS and LIG families for homes up to 40 square metres, with a minimum project size of 250 units. The cost between the centre and states was generally shared on a 50:50 basis. A linked credit scheme, the Rajiv Rinn Yojana, provided interest subsidy on home loans so that EWS and LIG borrowers could buy or build houses.

Defining EWS and LIG categories 🔗

Much of this policy machinery rests on income categories that decide who qualifies for help. EWS typically refers to households with the lowest annual incomes, who account for the overwhelming majority of the housing shortage. LIG refers to households slightly above that threshold who can afford some housing costs but still need support with credit and down payments. These categories are used across schemes to target subsidies and reserve units, though the exact income limits have been revised many times over the years.

This era also saw the Valmiki Ambedkar Awas Yojana (2001) for slum dwellers and the Basic Services for Urban Poor (BSUP) launched in 2005 under the Jawaharlal Nehru National Urban Renewal Mission, which bundled housing with water, sewerage, drainage, and community amenities for the urban poor.

Impact and challenges 🔗

Seven decades of effort have produced real gains. Millions of subsidised homes have been sanctioned, slums have received water and sanitation, and institutions like HUDCO have built up the financial plumbing for low-cost housing. The flagship Pradhan Mantri Awas Yojana (Urban), launched in 2015 and now in its second phase, continues this lineage with components for beneficiary-led construction, affordable housing in partnership, in-situ slum redevelopment, and credit-linked subsidies.

How effective have these measures been? 🔗

Despite genuine progress, the gap between demand and supply remains stubborn. The urban housing shortage runs into tens of millions of units, and studies estimate that around 95 to 96 percent of this shortage comes from EWS and LIG households. In other words, the people the schemes are meant for are exactly the people still left waiting. The deficit is projected to grow further as cities expand.

Why the problems persist 🔗

Several structural issues explain why housing the urban poor is so difficult. Land prices in major cities make affordable home ownership almost unviable, since land is the most expensive part of any housing project. Credit access is another barrier, because informal workers often lack income proof or credit history, which makes banks hesitant to lend and pushes families towards expensive informal loans.

There are also design and delivery problems. Houses are sometimes built far from workplaces, so beneficiaries cannot live in them without losing their livelihoods. In some cases, allottees have sold their units rather than move in, defeating the purpose of the subsidy. Critics also point out that ownership-focused schemes tend to exclude migrants and informal workers who lack land and stable incomes, while rental housing for the poorest has been neglected. Rising material costs after the pandemic have further eroded the real value of fixed subsidies.

Finally, there is the recurring issue of implementation. The early UBS programme, for instance, was meant to cover many towns but could not be implemented everywhere because of administrative and capacity differences between states. The same uneven execution shows up in newer schemes, where success in one city does not guarantee results in another. The shift from a “provider” to a “facilitator” model also assumes a private market willing to build for the poor, which rarely happens without strong incentives.

From demolition to dignity 🔗

Looking across the decades, a clear pattern emerges. Housing policy moved from clearing slums in the 1950s, to improving them in the 1970s, to financing and partnering in the 1990s and beyond. Each phase corrected a flaw in the previous one, yet none fully solved the underlying challenge: cities keep growing faster than affordable homes can be built, and the poorest residents remain the hardest to reach. The ambition of a “slum-free” and adequately housed urban India is genuine, but it depends as much on land reform, credit access, and honest implementation as it does on the schemes themselves.

What do you think? If nearly all of the housing shortage falls on EWS and LIG households, should the government return to directly building homes, or is enabling the private market the smarter long-term bet? And in a country where land is so expensive, is in-situ slum redevelopment a realistic path to housing the urban poor at scale?

References

1. https://www.indiacode.nic.in/handle/123456789/1709?locale=en
2. https://eacpm.gov.in/wp-content/uploads/2024/05/Revisiting-complex-conundrums-of-slum-definition-in-urban-policy.pdf
3. https://hudco.org.in/writereaddata/FAQ-hudco.pdf
4. https://ijcrt.org/papers/IJCRT2102198.pdf
5. https://www.india.gov.in/information-rajiv-awas-yojana
6. https://mohua.gov.in/upload/uploadfiles/files/RAYGuidelines.pdf
7. https://www.ibef.org/blogs/pradhan-mantri-awas-yojana-a-game-changer-for-urban-and-rural-housing
8. https://csr.education/urban-planning-development/housing-shortage-india-causes-data/
9. https://www.pmfias.com/indias-urban-housing-crisis/