With India’s manufacturing and service sectors heavily reliant on migrant labour, ensuring proper housing for these workers isn’t just a matter of welfare — it’s a structural necessity for economic progress.

Living On The Edge

Migrant workers have become the backbone of India’s industrial clusters like Tirupur in Tamil Nadu. According to the 2011 Census, India has 41.4 million inter-state migrant workers. Their work make up a least 10 per cent of India's Gross Domestic Product (GDP), according to an International Labour Organisation report. However, their critical role in economic growth starkly contrasts with their living conditions.

Many migrants live in overcrowded, poorly-ventilated spaces with limited access to basic amenities like water, sanitation or healthcare. This lack of adequate housing pushes workers into informal settlements, deepening urban challenges like congestion and pollution.

The Foundation for Economic Development’s report, Worker Housing: Unlocking Labour-Intensive Manufacturing in India, highlights the dire state of worker housing and points to actionable solutions that demand immediate attention.

While improving worker's housing is about the fundmental needs of people, from a capitalistic perspective, it directly impacts business outcomes. Proximity to safe and affordable accommodation enhances workers' well-being, reduces absenteeism and boosts productivity.

The FED report draws connections between stable housing and higher factory output, underscoring the broader economic benefits of tackling the housing deficit.

Regulatory Barriers & Reforms

A major impediment to formal worker housing development is India’s restrictive regulatory framework. Housing developments are frequently hindered by rigid zoning laws, which separate industrial and residential areas.

Building regulations such as low Floor Area Ratios (FAR) and Ground Coverage Ratios (GCR) in industrial zones further exacerbate the problem by limiting the efficient use of land for housing.

In many industrial zones, current regulations cap FAR at levels unsuitable for accommodating large groups of migrant workers. To address this, the government could take cues from global examples like Singapore, where purpose-built worker dormitories are governed by relaxed building rules, allowing for higher density and optimised land use. 

Streamlining approval processes and revising such outdated norms in India’s industrial hubs would open the doors for more affordable worker accommodations, creating opportunities for public and private stakeholders to invest.

Policy Priorities For Budget 2025

The Affordable Rental Housing Complexes (ARHC) scheme, launched for migrant workers, may also see renewed focus. Strengthening public-private partnerships could help streamline construction and provide more affordable rental options.

The upcoming Budget 2025 presents an opportune moment to focus on migrant worker housing. The government’s previous initiatives, like allocations under schemes such as the PM Awas Yojana, have laid the groundwork for addressing urban housing needs. However, these schemes have largely overlooked the unique requirements of migrant workers in manufacturing hubs.

Policies tailored specifically for migrant housing could include introducing rental housing models targeted at low-income groups and establishing partnerships with private developers to build affordable worker accommodations near industrial zones.

A shift in focus towards large-scale worker's housing initiatives could encourage states to adopt more flexible regulations and drive industrial growth in underserved areas. 

Another key aspect is financing. The government could provide subsidies or tax incentives to developers building worker-specific housing while also offering rental support to workers through vouchers.

These measures would make housing affordable for workers without creating undue financial stress on employers or landlords. Moreover, introducing centralised regulatory frameworks to standardise worker housing policies across states would promote consistency and scalability of efforts.

The cost of inaction is significant. Persistent housing shortages not only perpetuate inequality but also risk stalling industrial progress as high turnover and low productivity disrupt supply chains.

The FED report warns that without systemic change, housing scarcity could become a bottleneck in India’s goal to double its manufacturing output by 2030.

The spotlight on worker housing in Budget 2025 would signal that India is serious about strengthening its manufacturing sector while ensuring that the country’s urbanisation is sustainable and inclusive.

If the government embraces these recommendations, it could transform the housing landscape for millions of migrant workers and set the stage for long-term growth.

For India’s millions of migrant workers, affordable and dignified shelter should not be a luxury. It is a stepping stone to opportunity and a vital component of the nation’s economic resilience.

Budget 2025 is an opportunity for policymakers to recognise and act on this pressing need, bridging the gap between industrial development and social equity.