Housing policy formulation should be informed by a careful understanding of
the behaviour of the urban housing market, as reflected by housing demand
behaviour. Such basic information is important, not only for improved proje
ct design but also for the development of better sector-wide policies. The
overall analysis in this paper stresses the importance of prices and income
on the demand for housing in Mumbai metropolitan region, Estimates of hous
ing demand function are given. In our analysis, we account for rent control
in Mumbai which distorts rents. The results indicate that housing demand i
s elastic with respect to income and price. The income and price elasticiti
es are around 1 and -1 respectively. We also estimate income and price elas
ticities for different income classes. The paper concludes with policy pres
criptions.