Rethinking the 100 new cities plan

News: The idea of creation of 100 new cities in India has not taken off. It was an important mission launched by the public authorities in 2014 which included the Smart Cities Mission.

Why new cities are needed in India?

Economic Growth and Job Creation: Urban real estate development is a part and parcel of economic development and job creation. Therefore, it has to be properly focussed.

Very little land is needed to build new cities: For example, top 10 most populous cities occupy only about 0.2 per cent of the national land mass. Even urban areas as a whole occupy 4 per cent of the land base in India.

Only Few Cities Developed in India: India is a huge country with 28 states and eight Union Territories. Only a few new cities have come up since 1947

Low Level of Urbanization: The urban population in India still remains very low. It is at about 35 per cent which is very low in comparison to China (65 per cent)

What are the challenges in the development of cities?

The Land Acquisition Act, 2013: It makes acquisition difficult and costly. An Attempt to amend the 2013 Act has also been failed. However, there is still a way out.

A variant of Inspector Raj was abolished in manufacturing sector but its variant remained in the urban real estate sector: The private sector is still not allowed to provide infrastructure for the much-needed additional real estate development on a large scale.

Demand Supply Mismatch in Cities: There are unsold inventory of apartments built up in several cities. It is because real estate developers keep their supply limited relative to the demand. They build costly apartments. However, the demand for low-cost apartment is high which remains unmet. Therefore, the market price of urban real estate is high.

Inadequate Availability of funds for Mission of 100 Cities: A huge amount of finance or funds is required for development, or the planning and the implementation machinery.

Way Ahead

Participation of private players: There is a need to have an appropriate long-term policy framework to incentivise the participation of big private real estate companies in making the mission of 100 new cities real. They can be involved to plan, raise resources, construct, marketing, for instance, the development of much of Gurugram is an example.

Abolishing a variant of the licence-permit-quota Raj in the real estate sector:

Promoting construction of all variants of property: At substantially lower prices, we have massive demand. The construction in this segment is important.

It is imperative that we have several new cities, and not just extension of existing cities, which can be a messy and costly affair.

Source: This post is based on article “Rethinking the 100 new cities plan” published in the business standard on 07 March 2022