Design thinking (DT) has emerged as a human-centred, empathy-driven, and iterative methodology with increasing relevance to architecture and built environment research. Although widely adopted in education, business, and innovation domains, its structured application in group housing design particularly in the Indian context remains limited. The present study conducts a comprehensive systematic literature review (SLR) to examine how DT has been utilized in housing, built environment innovation, user-centred frameworks, psychological needs assessment, and related interdisciplinary domains. Following PRISMA 2020 guidelines and adapting methodological rigor from established DT-based SLRs, the review synthesizes insights from six high-quality peer-reviewed publications: including systematic reviews of DT in education, innovation in sustainable built environments, user-centred design in architecture, and DT-driven community engagement. The review process involved defining search equations, applying explicit inclusion exclusion criteria, screening eligible studies, and thematically analysing selected literature. Findings reveal that while Design Thinking contributes strongly to empathy building, problem framing, co-creation, prototyping, and iterative evaluation, its integration into group housing has predominantly focused on physical and functional design rather than psychological, emotional, or socio-cultural dimensions of dwelling. The studies highlight substantial gaps in incorporating user aspirations, lived experiences, safety perceptions, community bonding, and behavioral patterns, especially within high-density urban housing. Research from the built environment domain shows that innovation frameworks integrating Design Thinking can significantly enhance sustainability, inclusivity, and user experience, yet these approaches remain underutilized in Indian housing practice. The review identifies four major thematic gaps: (1) limited empirical studies applying Design Thinking to real housing contexts, (2) insufficient integration of psychological and experiential needs in design processes, (3) weak adoption of participatory and iterative methodologies in public sector housing (e.g., JNNURM, PMAY), and (4) lack of scalable frameworks for translating user insights into design decisions. This SLR establishes a clear foundation for developing a DT-based framework for group housing, aligning user needs, psychological wellbeing, and community dynamics with spatial, functional, and policy-driven housing requirements. The review concludes that DT holds transformative potential for rethinking housing beyond physicality toward human-centred, emotionally resonant, and socially sustainable living environments.