The government this month asked states to consider fitting old passenger coaches with electricity and sewerage connections, and installing them in areas of cities where shelters are needed.
Campaigners say the move does not address the issue of a crippling shortage of shelters and affordable housing in the country.
Telangana is looking into acquiring up to 10 coaches for this purpose, according to a senior official in the urban development ministry.
"We have asked officials to look into the logistics of converting five to 10 coaches into shelters," said L Vandana Kumar, a director in the state department.
"The main issue to building shelters in the cities is the lack of land. We are looking into possible solutions; this is a temporary solution until then," he said.
There are about 1 million urban homeless in India, according to official data, although charities estimate the actual number to be three times higher.
The urban homeless population rose by a fifth in the decade to 2011, as thousands migrated from villages in search of better prospects. Every year, hundreds die from exposure to the cold or heat on pavements and station platforms.
The Supreme Court in 2010 had ordered one homeless shelter for every 100,000 people in 62 cities, with facilities including drinking water, subsidised meals, beds and lockers.
Last year, the Supreme Court slammed the government for failing to provide shelters, despite availability of funds.
A panel appointed by the top court said money earmarked for shelters was being diverted for other purposes, and that the homeless continued to live on the streets, particularly in the states of Uttar Pradesh, Maharashtra and Gujarat.
"Funding is not a problem anywhere, but homelessness is not a priority for states," Kailash Gambhir, a former judge who headed the panel, told the Thomson Reuters Foundation.
"Land is an issue, and officials are also afraid that more migrant workers will come if there are more shelters. We had made several suggestions, including charging a nominal rent, but states are not following through," he said.
India has committed to provide housing for all by 2022, creating 20 million new units. But the slow pace of implementation is leaving thousands homeless as slum dwellers are evicted.
Last year, buses and portable cabins doubled up as homeless shelters in northern India amidst a cold snap.