Modi Govt's Plan To Uncover The 'Big Urbanisation Strategy': Will 'Realty Lobby' Makes A Difference Or Not?

By Kishore Jindal in Delhi

Prime Minister Narendra Modi is expected to announce the implementation details for three major initiatives today. He will release implementation guidelines for three projects — 100 Smart Cities, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) for 500 cities and Housing-For-All by 2022 in urban areas.

These three projects have been in the work for some time now and the implementation guidelines are going to be the single largest investment by this government.
Cities as an economic force is well established fact as the genesis of a city is around economic activities. Therefore, as an investment it is expected to drive not only urban rejuvenation but also the economy.

There are challenges with urban rejuvenation and I have pointed earlier that most cities lack the capabilities of participating in the Smart Cities challenge. The government seems to have taken this seriously and before the PM announcement tomorrow. They have released a call for proposal from firms to help cities develop a plan for the smart cities challenge. This is the beginning of the process as states have to develop, propose and submit this plan to the government.

The challenge is to keep the real estate lobby out and actually develop a plan that is inclusive. The real estate sector will benefit but the inclusion of this lobby means that the plan will never be inclusive and will only cover the richest section of the society. Worse it can mean that underdeveloped area where the real estate has been acquired by developers.

Therefore, one of the most crucial element in selecting firms or plans is that they should be inclusive. The initial smart city white paper was an omnibus collection of everything and non-conclusive. The paper was criticised for its approach and lack of focus on implementation. The minister has subsequently presented a much more selected version of the smart city plan, earlier this year. This also lacked details on financing and did not truly understand the limitation of our cities.

The learning from JNNURM, the urban rejuvenation plan of merit from the central government, shows that it is not just the proposal but the implementation of the proposal that is important. Cities under JNNURM were asked to develop City Development Plans (CDP). The learning from the failure of CDPs is that cities and urban limits are loosely defined and a source of revenues. The only answer to this problem is Geo-Spatial planning for our cities. It is now possible to use homegrown open source software from companies like Akara Technologies to map our cities.

What the PM should announce is that the implementation of the smart cities project will be monitored by PMO Geo-Spatially. This is the top-down approach to ensure activity happens below. And data and implementation is monitored using GIS tools.

This is the top down, what about the plan itself. Initially, the plan was supposed to be for 100 smart cities and the funding is Rs 45,000 crores to be drawn over a period of five years. That is about Rs 9,000 crore per year, divided among 100 cities that is Rs 90 crore per city. This amount is just enough for a water sewerage project in a small city. Clearly, it is inadequate and a drop in the ocean. Even the government acknowledges that.

The government, in its endeavour to become fiscally wise, is wary of spending more on these schemes. I have suggested in the past that a central institution—Urban Infrastructure Investment Corporation (UIIC) needs to be created.

The government cannot depend upon the private sector or the PPP model to fund the cities. It just cannot be done. No organisation anywhere in the world will develop or build urban infrastructure capable of meeting he increasing demands of our population. Successive governments across the world have toyed and rejected the PPP model for developing urban infrastructure.

UIIC is the only way forward as the counter-party risk for borrowing has to be assured by the government for municipal corporations to raise funds. There are too many positives around a development institution to fund our urban infrastructure and it will be nice if the PM endorses it too in his announcement.

Besides the smart city project, there is also the AMRUT for 500 cities. Here the allocation is Rs 50,000 crores to be drawn over seven years. That is Rs 10,000 crores every year and a ridiculous Rs 20 crore every year per city. The last estimation by the London School of Economics for the funds needed for urban rejuvenation in India was $1.2 trillion over the next 20 years or approximately Rs 36,000 crores every year.

These estimates of the LSE took into account that there are 285 million urban residents in India and nearly 100 million live in slums.

Modi is also expected to announce housing for all by 2022 that is expected to be the biggest project in terms of size and funding. Under the scheme, the government seeks to make 2 crore homes in urban areas, mainly to service the urban poor.

The government wants to finance it by providing an interest subvention/subsidy scheme, a cheaper structured finance to such low-income categories.

Also, it has already previously increased the amount of home loan that can be availed by people in the metro cities, thereby acknowledging the fact that houses in urban areas are more expensive. But what the housing finance and banking sector would be looking at how will the land be acquired for this low cost housing. If the current land bill continues to be stuck it is unlikely that developers would start building low cost housing just because there is a demand.

Demand has not been a great driver for low cost housing as every developer only wants to develop housing for the urban rich. So it will be interesting to see how the government will address the land issue in the housing for all plan.