On Thursday the 25th of June, Prime Minister Modi, by design or by sheer accident, chose the landmark date to live up to his electoral promise and launch three mega-projects to take India to the next level of development in an audacity of hope. Three urban development and reconstruction peojects – the ‘Atal Mission for Rejuvenation & Urban transformation’ (AMRUT), the ‘Housing for All by 2022’, and the ‘100 Smart Cities’ mission – entailing an initial investment of 400,000 crore rupees. Both in scale and scope, these surpass both the post WW-2 Marshall Plan for the economic reconstruction of Europe and Germany; and the Douglas McArthur plan for economic recovery and socio-political transformation of Japan. Does it augur well for the long-in-doldrums Indian real estate sector ? Vinod Behl ruminates …
The three-pronged initiative of the NDA government through big ticket urban-focused investment schemes of the Atal Mission for Rejuvenation & Urban Transformation (AMRUT), Smart Cities Mission & Housing for All, with a central funding of INR 4 lakh crore, holds the promise of providing a much-needed fillip to Indian real estate, housing and infrastructure – and raise the living standard of people by creating world-class cities and spaces. But the government needs to surmount a number of tough challenges to successfully implement these schemes and realize their full potential.
As per the plan, under Smart Cities Scheme, 100 new cities will be developed, with each city getting an annual central funding of INR 100 crore over the next five years. Under AMRUT, 500 cities and towns would be rejuvenated over next 10 years. And under Housing for All, 2 crore affordable houses will be built through slum rehabilitation, with the help of private developers, housing for poor with credit-linked subsidy, housing projects with public and private sector and subsidy for individual house construction.
The enormity and challenge of urban revamp can be gauged from the urban population explosion. Every decade we add one Brazil (181 million people). By 2020, about 123 million of additional urban population will be added. An estimated 600 million Indians will be living in cities by 2030, up from 290 million, as reported in the 2001 census. By 2025, 78 percent of India’s urban population will be concentrated in 69 metro cities, putting severe pressure on already crumbling physical and social infrastructure. Inefficient and faulty urban planning is resulting in massive consumption and wastage of precious water and energy resources and causing major sanitation and health problems due to increasing slums and poor waste disposal. In this backdrop, PM’s initiatives assume significance, especially as contribution of built environment to economy accounts for about 17.5 percent of GDP as per 2010 statistics and in view of industry and services growing faster than agriculture, people are moving from farms to urban areas.
That technology holds key to government’s initiatives aimed at urban rejuvenation is amply demonstrated by a recent survey of 2000 buildings in India done by Honeywell, that emphasizes on the need to invest more in smart building technologies as such smart building solutions can make facilities more connected and adaptive, reduce energy and operating costs and improve the safety and quality of life for occupants and users. Information & Communication Technologies (ICT) help make a smart city’s critical infra, components and utilities interactive and efficient. Through Intelligent Building Management Solutions, energy saving and lower maintenance costs can be achieved, at the same time prolonging the life of assets and reducing the carbon footprint. Last year the government introduced the draft Internet of Things (IOT) to create IOT-enabled smart cities eco-system to ensure faster implementation to improve overall efficiency. CISCO has established an IOT hub at Bangalore to help companies develop software applications for deployment in the upcoming 100 smart cities. IBM has prepared an Integrated Communication Technology (ICT) Master Plan for Dighi Port Industrial Area under DMIC.
Along with technology, crucial real estate reforms are necessary for the success of programmes aimed at urban revamp. Considering that in future, power will be increasingly generated from renewable resources, it is necessary that we move from consumer-oriented generation model to a model based on principles of smart power generation, smart power grids, smart storage and smart consumption. Keeping this in view, the government has converted Solar Energy Corporation of India into a growth-oriented commercial company to generate and sell power and develop other sources of renewable energy. It has also renewed solar power generation targets for 2022 from 20000 mw to 100000 mw. In another progressive policy initiative, the government has approved 6.5 percent interest subsidy on housing loans with tenure up to 15 years for economically weaker sections and lower income group. It is however questionable as to why real estate has been kept out of GST when fees and taxes account for as high as 35 percent of what the home buyer pays as the cost of his house. Similarly, with direct institutional support to the real estate sector from banks, HFCs, private equity etc., accounting for a mere 22 percent of total investment flow in the sector, reforms to increase capital flows are required.
There are other key challenges which need to be met before government’s initiatives for urban revamp could be successfully implemented.
Real estate
To start with, there is the funding challenge. Though the Centre has earmarked liberal funding of INR 4 lakh crore for the three initiatives of urban development, it will however not be easy for the states and local urban bodies to arrange for additional large investments, considering their poor financial health. It is also a big challenge to meet the huge gap in services under AMRUT scheme. Against 135 litres per person per day desired water supply, urban population gets only about 69 litres. Besides, cities and towns are able to treat only 5 percent of total waste, while sewerage treatment is merely 3 percent. The situation on the power front is equally bad. Also, considering the scope and scale of urban development initiatives, there is a severe shortage of skilled professionals, with demand-supply gap of 82-86 percent in the core professional group of civil engineers, architects and planners, not to talk of skilled labourers. There is a huge challenge to make land available for massive urbanisation programme. On the technological front, the challenge will be to achieve economies of scale and their viability on mass scale.
And last but not the least, there is the challenge of smart governance at Local Urban Bodies level, as there is tremendous shortage of professionals there. The challenge is to provide transparent and efficient governance at the municipality level.