In his Booker-winning first novel, The White Tiger, Aravind Adiga began his fictional exploration of the less attractive face of modern India: a densely populated urban society in transit, in motion, and on the make. An India where temples arrange express-entry lines for paying customers, and money trickles from the glassed shards of the finance centres into the slums "like butter on a hotplate enriching some and scorching others". The eponymous White Tiger, Balram Halwai, was at home here. Poor but ambitious, Halwai saw himself as an entrepreneur, a man made "from half-baked clay". He meant that his potential wasn't yet fulfilled, but the phrase also carried baggage that Halwai might not have cared to haul, with its echo of Richard III's complaint about being born "scarce half made up".

Dharmen Shah, the property developer villain of Adiga's second novel, has the opposite problem. Shah's successful self-making looks likely to be his undoing as the toxic dust from his demolition projects slowly turns his lungs into a swamp of poisoned mucous. His latest plan is to buy out the Vishram society, a housing co-operative near slum-land south of Mumbai's airport, and to redevelop it into a stack of luxury apartments. An Ayn Rand-ish übermensch, Shah has already built a development called the Fountainhead as part of his booming construction empire in Mumbai, a city which "like a practitioner of yoga, was folding in on itself". "You should look around you," he says. "You should always be thinking, what does he have that I don't have? That way you go up in life.'

This, in Adiga's fiction, is the money mantra of the new globalised India, "repeated to tourists and locals, in Hindi or in English: What do you want?"

Opposing Shah's redevelopment plan is a group of residents for whom the old tumbledown building represents more than land value. This skilfully directed ensemble cast gives Adiga access to a range of voices and experiences, from the blind woman who navigates the old building by touch, to the destitute cleaning girl who fears for her job, to the mercenary secretary who just wants a little baksheesh. Slowly, under the pressure of intimidation and the lure of hard cash, the opposition breaks down, until the retired teacher Yogesh Murthy remains "Last Man In Tower", a lone holdout against encroaching gentrification and slum clearance.

With its echoes of Olympic evictions in Beijing and London, as well as Mumbai's own periodic expulsions, Last Man in Tower is a timely parable for the age of the property bubble and the vanity redevelopment project. Set in a city where the world's first billion-dollar skyscraper home offers views, on a clear day, of the levelled shantytowns to the north, it derives its best local effects from that uncomfortable contrast. This Mumbai is no orientalist fantasy of saffron and saris but a city of work and waste, abattoirs and landfill sites where "ribbons of unspooled cassette-tape" drape the mounds of rubbish "like molten caramel". Early on, an aeroplane flying over a temple is "white and tubular and glistening, like a sea snake leaping up"; later we find water buffalo wandering near the same temple, "coated in dust and dung, their dark bulging bellies spangled by flies".

Circling the temple, those buffalo and that plane suggest the messy and unplanned connectedness of old and new in 21st-century Mumbai. They also work more subtly to set up the contrasts they embody than does the book's menagerie of emblematic fauna: a stray dog, a pair of hawks fighting outside a high-rise, and an evicted mother crow all struggle here under a hefty load of symbolism. Adiga wants to squeeze meaning from every possible encounter and environment, so that we can't see the coconut palms shading a roadway without being told that they were "a botanical experiment conducted by the late Mr Alvares, whose mansion, full of unusual trees and plants, had been sold by his heirs". At times it seems that Shah's hypercapitalist world-view  in which meaning has been denied to anything except acts of acquisition  is being measured against one in which everything, from a scavenging child to a slick of water, must mean something.

The attempt to impose meaning begins to seem a little incongruous in the last 50 pages or so, as Last Man in Tower shifts in tone to become a darker and more troubling story about the corruption bred by greed in otherwise healthy and tightly knit communities. Close friendships and relationships turn out, like the redeveloped parts of the city, to be built on layers of noxious material, on strata compacted of small discarded resentments. Picking through this detritus as it begins to overwhelm his characters, Adiga constructs an unsettling, if rather unsettled, novel: one well suited, for that reason, to the febrile and shifting city it seeks to reclaim.

If the residents of Tower A, Vishram Society, pride themselves on anything, it is their respectability  their "pucca" way of life in their "unimpeachably pucca" apartment building. Once pink, Tower A may now be a "rainwater-stained, fungus-licked grey"; it may not boast an uninterrupted supply of running water; it may sit amid the slums of Vakola, in the flight path of Mumbai's domestic airport; and it may be falling into a state of disrepair unchecked by its ineffectual secretary. But Vishram Society's virtues outweigh its failings; a model of neighbourliness and middle-class virtue, it brings together those of different backgrounds  originally built for a Catholic population, it admitted Hindus in the 1960s and "the better kind of Muslim" in the 80s  in harmonious testimony to the possibility of cooperative living. That, at least, is the theory, although Aravind Adiga's painful tragicomedy demolishes it more quickly than Dharmen Shah, his ruthless property developer, throws up his luxury redevelopments.

The set-up is impressively simple. Shah and his "left-hand man", the sinuous Shanmugham, ride into town offering each resident a vast sum of money to quit their property: while a touch of resistance might produce a "sweetener", too much might result in a mysterious "accident". Tower B, filled with young executives, falls into line immediately, while Tower A proves a slightly tougher nut to crack. Its residents have their unofficial "parliament", but they also have complicated individual histories and sensibilities that Shah and his henchman must negotiate. Among them are the anxious Ibrahim Kudwa, proprietor of the Speed-tek Cyber Zone Cyber Cafe, whose mantra dictates that "a man with a bad stomach should never be asked to make decisions"; social worker Georgina Rego, staunch in her loathing of amoral redevelopers but tormented by the need to "trump" her well-to-do sister; and the retired Mr and Mrs Pinto, torn between the desire to send dollars to their children in America and their loyalty to "Masterji", the former schoolteacher who quickly becomes the linchpin of opposition to Shah's enticements.

Masterji is the eponymous last man, entrenched in his commitment to resistance, secure in his belief in the power of cooperative living, impervious to bribes and threats alike. With the Pintos, he imagines forming a "Vakola Triumvirate", the trio's strength of purpose rivalling that of Caesar, Crassus and Pompey. But if his secret and apparently inviolable weapon is a lack of material desire that means he cannot be bought, it also comes to seem like a weakness, indicating an inability to empathise with his fellow residents. Is Mrs Puri so wrong to wish for better surroundings in which to bring up her 18-year-old son Ramu, whose Down's syndrome she poignantly describes to her neighbours as a small developmental delay? Would it be so awful if Secretary Kothari could live in sight of the flamingos of his youth, so that "all the wasted decades in between fell away"? And do the convictions of one man cancel out the desires of the rest of the civic body?

Adiga skilfully poses these problems and equally skilfully frustrates our attempts to answer them. For much of the time, our sympathy is almost entirely with Masterji, particularly as his neighbours  whose bad behaviour has hitherto been largely confined to gossiping, eavesdropping and nosing around in one another's rubbish bins  begin to treat him with increasing disdain and viciousness. Similarly, Adiga's portrait of Shah as a rapacious, bullying parasite seems, at first sight, to preclude very much in the way of tenderness or respect. And yet both men have unexpected hinterlands: Masterji's unyielding austerity is also a form of narcissism, while Shah's ambition can be interpreted as embodying the kind of explosive energy needed to change people's circumstances. "Like a lizard I went up walls that were not mine to go up," he reflects on his early career, spent clearing slums with which other developers didn't want to be associated.

Last Man in Tower can tend slightly towards the schematic  as each resident falls inexorably under Shah's spell, the novel risks concentrating its power in the suspense of whether Masterji will triumph or eventually be subsumed by peer pressure, external threat, or both. But Adiga also manages to thicken his narrative with a subtle and nuanced examination of the nature of personal corruption  more subtle, in fact, than in his powerfully scathing first novel, The White Tiger, which won the Man Booker prize in 2008. His targets here are similar: the web-like social structures that surround citizens, creating a stasis that defies attempts at progress; the vacuum created by misgovernance that allows greed and envy to flourish; the bureaucracy  represented here by a double-talking lawyer straight from the pages of Dickens  that creates the illusion of order and justice while perpetuating the opposite. "You and I were trapped," the real-estate broker Mr Ajwani, one of the novel's most ambiguous figures, tells Mrs Rego, "but we wanted to be trapped," and the novel goes the distance in exploring the attraction of collusion.

Last Man in Tower has a broader and more forgiving feel than The White Tiger, incorporating a gentler comic tone that finds affection as well as despair in poking fun at its characters' pretensions and frailties. But Adiga's anger at the India he describes  cities in which rapid economic expansion comes at an impossible price for a vast swath of their inhabitants, and in which the slow fading of the caste system has not been accompanied by a rise in social egalitarianism  remains undimmed. Describing his childhood reading in Mangalore, Adiga once professed his early enthusiasm for the works of Golding, Orwell and Shaw, three writers with a keen appreciation of the muddy intersections between individual and political will. In this complex and multi-layered novel, he continues his project of shining a light on the changing face of India, bringing us a picture that is as compelling as it is complex to decipher.