Making good on their election pledge, Congress party finance minister Pranab Mukherjee has allocated near R's 40 billion (£506 million) to create new affordable housing for slum dwellers.

Property sector focus shifts to affordable living

This move coincides with a change of focus in the property sector; oversupply in the premium segment has led to realization that unmet demand for affordable living provides revenue opportunity. Government tax breaks and a McKinsey & Co estimated shortfall of more than 25 million low-cost houses means a potentially lucrative market.

So the investment and the means are in place but is this enough?

Jobs and housing

Signs are that cheaper housing will be built away from cities; freeing space for more profitable future development, this creates a problem. Slums arise due to a need for the poorly paid to live affordably close to where they work. Relocating them from cities may deprive them of the jobs they rely on. Therefore jobs as well as housing need to be created away from the cities, it begins to sound like new cities are required?

Deepak Parekh, chairman of HDFC Bank recently wrote to his shareholders, raising questions about plans for low-cost housing. He stresses that affordable housing needs to, "make economic sense in terms of proximity to work place".

Next wave of urban migrants

In addition, as urbanization increases, more urban migrants will descend on major cities looking for work. Steps need to be taken to ensure that new slum communities do not replace old ones.

Property developers also have to be willing to stay the course. The true test will come when India's property market bouncers back, will developers carry on building lower margin affordable housing or switch to cash in on housing for the middle class and elite?

Wonderful joke?

Those set to benefit aren't convinced. Jockin Arputham, president of the National Slum Dwellers Federation sums up their opinion, "This kind of political statement that the government delivers is not the best. Some of my slum people told me: 'What a wonderful joke!' If he had said 20 years, I would say it is worth doing."

Source - Chart taken from Financial Times 9/7/09, data from Office of the Registrar General and Census Commissioner, India, 2005