• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

Elusive Smart Cities

The 'smart cities' plan raises questions whether the government can raise hundreds of billions of dollars to pursue its ambitions, and if it's serious about tackling squalid conditions in many parts of India's major urban centres

Photo Credit :

We obsess over the term "smart". We vie for "smart" phones, "smart" homes; and now the latest, "smart" cities. After multiple presentations by city bodies and state governments, Union Minister of Urban Development Venkaiah Naidu recently released a list of 20 cities that would be the first to become "smart". The list includes Bhubaneswar, parts of New Delhi as well as old cities like Surat, Ahmedabad, Kochi and Bhopal. Two of the largest and most chaotic cities with the largest slum populations - Mumbai and Kolkata - did not find place in the first list.

The idea of "smart" cities in India first popped up when Finance Minister Arun Jaitley was presenting his budget in May 2014. He said the government was committed to developing 100 smart cities and allotted around Rs 7,060 crore to draw up plans.

Predictably, there was a huge buzz. India is rapidly becoming urbanized with a recent McKinsey Global Institute (MGI) report predicting that more than 590 million Indians, or around 40 per cent of the country, will be living in cities and towns by 2030. On the other hand, most cities had become a planner's nightmare with roads, transportation and housing in short supply; and mushrooming haphazardly without relevance to real or projected needs.

Since the 2014 announcement, there have been frenetic attempts at identifying those cities that will qualify for development. But no one in government is quite sure what makes a "smart" city. It is a European term which identifies technology as the trigger to make the lives of citizens more comfortable, and synchronize it with the needs of the modern urban environment. Siemens India's MD & CEO Sunil Mathur, who recently made a presentation to government on developing smart cities, said: "Ours was the 56th definition of smart cities!"

Initially, the central government thought it would be developing greenfield cities; the thinking then veered around to "retrofitting" old cities as brownfield projects.

Then the government realized it had neither the funds nor the planning capacity to do 100 cities together; so it plumed for a first round of 20 cities, and set about choosing them based on planning vision, capacity to transform, etc. What we have ultimately after nearly 3 years of toil and sloganeering is a plan to invest Rs 50,802 crore over 5 years in 20 cities to develop infrastructure and technology.

It's a drop in the ocean! Deloitte estimates a minimum of $150 billion is required over the next few years to develop these smart cities, with $120 billion being mobilized by the private sector. This itself is conservative as internal government estimates say, if infrastructure is systematically developed, the requirement is around $5 trillion over a decade to create 100 smart cities.

Tinkering Around
The current plan therefore is at best tinkering around. For instance, among the 20 smart cities is a part of Delhi - the newer, posh New Delhi Municipal Corporation area (NDMC) which is where the rich live in their colonial period, British-designed Lutyens bungalows. The Old Delhi areas, dense and squalid, have been given the go by.

Bhubaneswar, for instance, will retrofit and redevelop just 985 acres around its main railway station in the heart of the city, while Jaipur will improve its visual appeal and tourism experience of its walled city area of 600 acres.

The government hopes to raise the money through special purpose vehicles (SPVs), tap the debt markets, seek equity investment, and squeeze out funds through focused urban development taxes. However, with no regulatory framework on how funds and foreign investors will participate in the programme, the response has been poor.

"Investors' response to the Smart Cities programme is yet lukewarm, because they don't know yet what the fine print is, what they are getting into," Sunil Rohokale, CEO of the ASK Group, told this writer a while back.

Serious city planners have expressed concern that the concept of "Smart Cities" is more to do with erecting shiny glass edifices and icons of corporate well being; providing affordable housing and getting rid of slums has been given short shrift.

Ranjit Sabhiki, an architect who drew up Delhi's master plan, says in a paper on Smart Cities: "Currently planning of new settlements, are largely based on the areas developed for middle and high income housing. These occupy prime areas and define the main town sectors. They also tend to occupy more than 50 percent of the total urban area whereas space given to affordable housing is on average 15 to 20 percent. For low income housing, because the units are small, and larger numbers can be fitted in small land pockets, there has been a tendency to squeeze them into areas of leftover land wherever available. These are developed without support facilities. In many cities they are built as multi-storey blocks, with minimal dwelling units strung along corridors. Such developments degenerate into squalid slums over short periods of time."

Misplaced Priorities
Has the Smart Cities programme got its priorities wrong? Probably, yes. Most Indian cities have no organized, affordable housing for the poor, and the masses are left to fend for themselves in slums or overcrowded hovels. Public transportation is in shambles and lack of waste management and civic infrastructure ensure disease and health issues become part of the urban nightmare. Housing, public transportation, health and civic infrastructure, education - that is the list in order of priority that the government and local bodies should be tackling.

The urban improvement programme called the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched under the previous Congress regime in 2005, with all its flaws, addressed these basic issues. With $20 billion in the kitty to be spent over a decade, the scheme addressed city-specific transport and housing issues, and strengthened local municipal bodies.

The project list included a successful rapid bus transport network in Ahmedabad, multi-laning and city road development in the industrial town of Pimpri-Chinchwad and workers housing in Mumbai. The BJP government has scrapped the programme, replacing it with the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), named after former Prime Minister Atal Behari Vajpayee. We are yet to see how the new, grandiose scheme will work on the ground.

On housing the urban poor, there is no dearth of humongous plans and promises too but little action so far on Prime Minister Modi's call is for "Housing for All by 2022". A commitment of Rs 4 lakh crore over a decade to build 20 million homes has been made but we are yet to see the funds or the projects.

Monitor Deloitte, a consultancy specifically working on the private affordable housing segment, says the active shortage of homes is a humongous 15.1 million. Meanwhile, 2011 data shows the population of slum dwellers in the country has increased from 52.37 million in 2001 to 65.5 million.

People don't live in slums out of choice. They move into shanties when they can't afford anything better. How else do you explain a situation where there are thousands of unoccupied and unsold flats in Mumbai, Noida and Gurgaon even as desperate families search around trying to find an affordable home?

The fact is the home and residential property market is out of reach for an overwhelming majority. The last half-yearly survey by broking house Knight Frank India says the country is facing the worst depression in the home-buying market in 5 years. The all-India unsold inventory stand at over 700,000 units; and this would take over 3 years to exhaust. There is no pick-up even though prices are flat or are falling in most cities. The fact is that prices are still too bloated for people to afford a home.

If the priority is the man on the street, the government has to find swathes of urban land, and construct millions of homes at affordable prices and rentals. This is the only way to build a strong foundation for modern, smart cities.

Top themes and market attention on: