What plagues India’s housing market? CEO and Senior Fellow, Reuben Abraham and Director and Research Fellow, Pritika Hingorani look at the conceptual fallacies and implications of capping Floor Space Index (FSI), the ratio of floor space that can be built on a plot of land.

Excerpts: 

"The instinct to cap FSI is premised on two conceptual fallacies. The first is that policymakers can limit the number of people in an area by limiting the amount of floor space. The second is that FSI must be tied to existing infrastructure availability. On both fronts, reality proves otherwise. As productive cities such as Mumbai and Bangalore created jobs, people were willing to cram into less space to access work opportunities. Since the formal real estate market was stifled by FSI restrictions, slums proliferated. Prices skyrocketed, and space per person fell. Infrastructure — drainage and roads — crumbled under the strain of higher occupancy. This reinforces fears about density, justifying continued caps."

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