By Amit Kapoor and Meenakshi Ajith
Cities are powerful drivers of national economic growth, and in India the largest share of that growth is concentrated in a handful of them. Delhi is one such city and what draws young people to it is not the city itself, but what it contains: universities that admit on merit, coaching networks, employers who recruit at scale, and the possibility of a career that a district town cannot supply. Every year Delhi University alone admits around 71,600 undergraduates, and at least fifty percent of them come from outside the city. For those students, housing is the single largest cost of moving and the part of the decision they have the least control over. A paying-guest bed with meals in the lanes off South Campus runs to about ₹16,000 a month. In Kamla Nagar, a room that cost around ₹12,000 in 2022 was letting for ₹18,000 within two years. These are not incidental expenses at the margin of an education. For most families they are comparable to the fees, and they are paid into a market the state neither supplies nor supervises.
The absence of supervision in this market is not difficult to establish. The five-storey paying-guest house that collapsed in Satya Niketan on September 6, killing seven, had no sanctioned building plan, an unauthorised basement, a fifth floor in excess of what the floor area ratio permits and no fire clearance, and the municipal file on the property recorded no inspection, no complaint and no enforcement action of any kind. The same pattern produced June’s fire at a Hauz Rani guest house, which was running twenty-six rooms on a permit for six. Where inspection is unreliable, safety becomes one of the margins on which a supplier can economise. The administrative response has been identical each time with an arrest, a few suspensions, a demolition drive, then silence.
At this frequency, individual culpability explains very little. The engineers suspended after a collapse did not determine how Delhi would house the students it admits each year, and the owners arrested were meeting a demand that public provision had left unserved. Nor is the difficulty density, which is where this conversation usually ends up. Delhi is a dense city and will become denser, as Indian cities must if they are to remain productive.The distinction that matters is between density that has been planned, financed and inspected, and density that is improvised on plots too small to carry it, which is what the capital has permitted by default.
That improvisation is what antediluvian building norms designed for an era of horse-drawn carriages leave a city to do. Delhi’s older colonies were built to a floor area ratio of about 1.5, and much of the capital remains capped well below what comparable Asian business districts allow. Limiting how high a plot may rise does nothing to reduce the demand pressing on it; it raises the value of every unsanctioned floor instead. The regeneration provisions and additional FAR proposed in the new Master Plan address precisely this, and the sooner that framework is settled, the sooner rebuilding an ageing structure becomes financially viable.
Delhi University enrols more than 1.14 lakh undergraduates across its 91 colleges and offers them 4,577 hostel beds, of which 3,145 are for women and 1,432 for men. Sri Venkateswara College, whose students live in the lanes where the building fell, teaches about 4,500 and has 150. Between 2019-20 and 2023-24, AISHE data shows student enrolment in Delhi growing at 2.75 per cent a year, hostel intake capacity at 1.06 per cent, and the number of hostels themselves at 0.37 per cent. Students are the most visible group in this position rather than the largest. The NITI Aayog committee that reported in December 2025 put the national housing deficit at 5 to 7 crore units, and the households behind that figure are the ones the city runs on: nurses, delivery riders, security staff, domestic workers, junior municipal employees.
India’s flagship urban housing programme is an ownership programme. Beneficiary-led construction requires land. The credit-linked subsidy requires a documented income and a loan the household can carry. These are sensible conditions for the families the scheme was written for, and they exclude renters almost by definition: the student here for three years, the worker following the work, the nurse on a monthly wage. Rental housing is the segment that reaches them, and it is the one the state has built least of.
The returns from building it are well established. An ILO study covering 45 countries found construction output multipliers consistently above the economy-wide average, with every million dollars invested in middle-income economies generating roughly 3.6 times that in wider output, and construction posted the highest real GVA growth of any major Indian sector in 2024-25, at 8.6 per cent. Vienna has built on a cost-rental basis since the 1920s and now houses over 40 per cent of its households, dampening prices across the whole market rather than only for municipal tenants. Germany founded the Studentenwerke in 1921, a year before the Delhi University Act, and they now run more than 1,700 halls with some 196,000 places on a mix of fees, rents and subsidy.
A financing structure that fits is already under discussion in India: public land leased on long tenure, rents regulated, and long-tenor debt serviced out of rental income rather than recovered from occupants in a few years. Applied to campus land, it answers the objection that debt-financed hostels will price out the students they are meant to house. The Lieutenant Governor, reviewing the collapse, cautioned that indiscriminate sealing would only leave students homeless and asked that student accommodation be examined through the universities, the MCD and the DDA. This is a welcome step. Demands on Delhi’s housing stock will grow over the next two decades, from students and workers alike. Regulation is one instrument for meeting them and public provision is another, and the capital has relied heavily on the first while leaving the second largely to the market. A more even balance would serve the city better, and there is time to strike it.
(Amit Kapoor is chair, Institute for Competitiveness. Co-authored with Pradeep Puri who is senior fellow, Institute for Competitiveness. X:@kautiliya).
The article was published with Business Standard on September 16, 2026.
