How To House India's Growing Urban Population

India's urban population is growing at a faster pace than in any other major nation in the world. According to latest estimates, 32.37 per cent of India's population is urban, and this is the second highest in the world. This is true of India's urban land cover, too, which is the fifth largest in the world. This, too, is growing faster than that of any major country in the world.

Prime Minister Narendra Modi recently said that smart cities would be equipped to handle India's rapidly growing urban population. “For the first time in human history, we are in an urban century. By 2050, two-thirds of the world's population will live in cities and three billion people will join 3.5 billion dwellers, with 90 per cent of the increase from developing countries.” Modi said.

In light of this, how can India manage its urban growth? What are the major factors that constrain India's urban growth?

With India's urban population growth, two changes are inevitable:

Much of the population growth in India will happen in its most populous cities. In many Indian cities, people live in houses that are too congested, surrounded by dilapidated infrastructure. For this to change, existing cities should house more people, allowing them to live in more spacious residences. For this to happen, cities will need to expand urban infrastructure, put idle land to use and repeal many obsolete regulations.

India should explore rural areas for development. Many argue that developing existing cities is more important than creating new cities from scratch. But, the political consensus necessary to improve the regulatory framework in existing cities is unlikely to emerge quickly. In cities built from scratch, imposing market-friendly regulations will be much easier. Voters in remote villages exert a disproportionate influence in policies in cities like Gurgaon and Mumbai, for instance.

Which are the possible ways in which India can raise its urban land cover?

 A large fraction of the land holdings in Indian cities is in the form of urban land holdings in the hands of state, central and urban local governments. This is especially true of Indian railways, the ministry of defence and port trusts. These are highly valuable urban land. There is no official land record of these assets but for some informal studies. When decades ago land in Tamil Nadu capital Chennai was informally surveyed, it was found that over 30 per cent of the urban land was in the hands of various government organisations. This, it is important to note, does not include the land under the control of housing boards and development authorities.

When a World Bank funded study was done in Gujarat's Ahmedabad, they found that the public sector owns 32 per cent of the developed or developable land area. This, again, does not include the public land used by informal settlements, railways, cemeteries, open spaces, heritage properties, land leased to industrial outlets and land occupied by public utilities. The value of even this limited land was more than enough to fund Ahmedabad's infrastructure needs for two decades.

What does these facts imply?

A) Indian cities should do an inventory of public land and other idle land.

B) Government agencies should be allowed to sell their land holdings, especially when the value of the land is greater than the purpose for which it is currently used.

For a long time the Urban Land Ceiling Act, which was later repealed, prevented private individuals and entities from occupying more than 500 square metre of land. This resulted in government authorities being the primary holder of land across Indian cities. Moreover, the uncertainty governing such laws make it difficult for development of private land in many cities like Mumbai. For greater development of Indian cities and for building privately constructed infrastructure, real estate developers and large corporations should be allowed to assemble land. When Indian cities grow and when less urbanised areas become cities, this will become very important.

Master plans of Indian cities, unlike in developed countries, are blind to demand for floor space. For example, India's urban planners often constrain commercial development in the heart of cities, assuming would lead to congestion. At the same time, they encourage real estate development in remote areas and mountains through subsidies. A remote village may not have many industrial outlets, but this does not mean that this is a market failure. This just means that there is less demand for industrial outlets and residential and commercial floor space in some parts of India. Similarly, if there is a huge demand for industrial, residential and commercial floor space in the heart of Delhi and Mumbai, this is not a market failure either. This merely means that there is huge demand for such services in heart of large cities where more people prefer to live.

Another factor which hinders urban expansion is the high stamp duty and registration taxes and low property taxes. Levying high stamp duty and registration charges without linking property taxes to the best possible use value of the land hinders urban expansion. This is because property taxes are a large source of revenues for urban local authorities. Property tax revenues are used to fund urban infrastructure and other services. Moreover, not linking property taxes to the best possible use value of land allows many government organisations like Indian railways to let valuable urban land remain idle. If they were compelled to pay a huge amount of money as property taxes, they would have liquidated their assets.

Rent controls laws prevent migration to urban areas, because it becomes difficult to find affordable houses in the rental market. Moreover, rent controls prevent renovation of properties in the heart of Indian cities. Allowing real estate developers to build taller buildings should be seen as one of the most efficient poverty alleviation programme.

There are also many regulations that prevent conversion of land from a certain use to another. Even when such regulations need not always prevent conversion of land from a certain use to another, it definitely slows it down. Such regulations allow land to be “dead” not just in hinterlands, but also in heart of cities where mills and factories once existed. There are also policies that stipulate that real estate developers should allocate a minimum size of plot for projects. This is one of the largest constraints imposed on the affordable-housing segment. India's urban planners seem to be increasingly recognising the need to repeal these legislations, making room for more and more urban Indians.