India faces a critical challenge in transitioning its workforce from low-productivity, low-wage jobs to more sustainable and higher-paying opportunities. Currently, 46% of the workforce is engaged in agriculture, which contributes only 18% to the country’s GDP.
To address this imbalance, manufacturing emerges as the only sector capable of absorbing large numbers of relatively unskilled workers at a pace necessary for sustained economic growth. Recognizing this, the Foundation for Economic Development (FED) has released a report titled “Worker Housing | Unlocking Labour-intensive Manufacturing in India”, which highlights the urgent need for proper worker accommodation to facilitate employment-intensive manufacturing.
Jobs in manufacturing and services are 3–6 times more productive than agricultural work and are predominantly concentrated in large industrial clusters. These hubs depend on a workforce far greater than what nearby rural areas can supply.
However, the report identifies a lack of quality worker housing as a key barrier to employment growth in the sector. Poor housing options near industrial zones deter workers from relocating, limiting productivity and workforce availability, ultimately undermining India’s global competitiveness in manufacturing exports.
The report reveals that current worker housing is largely informal, often taking the form of unauthorised slums or substandard multi-storey settlements. These arrangements fail to meet demand and compromise living conditions, resulting in a shortage of labour and reduced industrial output.
FED identifies regulatory hurdles as a major reason why private sector solutions for worker housing remain underdeveloped. Obstacles include rigid zoning laws, restrictive building regulations, lengthy approval processes, and high operating costs.
The report recommends a series of policy reforms to address the challenges in worker housing. It calls for implementing mixed-use zoning to allow worker housing in all zones without restrictions, enabling flexibility in land use. Additionally, it advocates for liberalised residential building codes, which would permit third-party certification and self-certification by chartered architects, streamlining approval processes and reducing land costs.
To make housing more affordable, the report proposes exempting worker housing from GST and applying residential rates for property tax, electricity, and water tariffs, thereby lowering operational costs. The report also addresses a critical dilemma: housing alone will not attract industries, and industries are reluctant to set up in areas lacking a workforce.
FED suggests viewing large-scale worker housing as essential infrastructure, capable of generating significant public benefits and fostering economic coordination. To break this cycle, the report calls for direct government intervention through subsidies for worker housing projects and rental voucher schemes to make accommodation accessible and affordable for workers.
FED, a non-profit organisation, is committed to driving India’s economic growth by identifying and supporting high-impact opportunities in collaboration with central and state governments. The organisation envisions sustained growth exceeding 10% annually to uplift the lives of all Indians.
