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Unlocking the potential of Indian cities
Part 5/5: Celebrating World Cities Day
Yesterday, the United Nations celebrated ‘World Cities Day’ commemorating the importance of urbanisation as an engine for development. Throughout history, the development of cities has been key in the growth process. Countries across the world have rapidly urbanised and simultaneously witnessed an increase in per capita income (Nguyen & Nguyen, 2018; World Development Report 2009).
Indian cities are critical for our big dreams for 2047. India is expected to add 416 million people to its cities by 2050, with over half its population residing in cities (NITI Aayog & Asian Development Bank, 2022). To accommodate the increasing urban population, Indian cities must create at least 90 million jobs in the next decade alone. A recent report by the Government of India highlights how developed and productive cities can facilitate India’s desired goal of becoming a $5 trillion economy.
Indian building regulations may be harming this dream. Research finds that land in Indian cities is left unbuilt and unproductive due to regulations that are not context-appropriate or growth-friendly. These regulations restrict the growth of buildings, hurt compact development, and force cities to spread out (Brueckner, 2009; Patel et al., 2018).
Our building standards render land unproductive in and around cities. Gold-plated minimums for standards like setbacks, open spaces, and parking, and low maximums for standards like height, lead to land wastage. Research shows that Indian cities leave twice as much urban land unbuilt as compared to world averages (Byahut et al., 2020). Previous articles on ground coverage, setbacks, parking, and floor area ratio restrictions highlight how building standards limit usable building space on a plot.
Our regulations make industry uncompetitive and housing expensive in cities. Restrictions on ground coverage, setbacks, parking, and height increase the cost of construction and inflate rents/prices. These standards make housing unaffordable and distort the market for residential/commercial/industrial land (Rajagopalan & Tabarrok, 2019).
Finally, these rules make our cities unlivable. People in cities have to live far from business areas if they are in the formal job market and bear consequent welfare costs. For example, in Bangalore, a restrictive Floor Area Ratio costs households 1.5% to 4.5% of their income in commuting (Vishwanath et al., 2013). Operating away from the city also means a shortage of public utilities, and higher transport costs and pollution (Urban and Regional Development Plans Formulation and Implementation (URDPFI) Guidelines, 2015; Yasin et al., 2021).
We need regulations that encourage compact, livelihood-friendly development. Unlocking urban land can help add jobs, reduce informality, boost business, and make cities more liveable. Compact cities can also help improve women’s labour force participation, boost labour productivity, and spur innovation (Brueckner & Sridhar, 2012; Carlino et al., 2007; Ciccone & Hall, 1996).
This November, Prosperiti will launch its State of Regulation Report that compares 10 Indian states on land lost to four building standards—ground coverage, setbacks, floor area ratio, and parking. These four standards applied together determine the footprint available for use. The State of Regulation Report will show the land lost as a result of regulatory choices and the monetary value and opportunity costs of these losses. The report aims to act as a ready reckoner for states to liberalise building standards, and move one step closer to developing livelihood-friendly cities.
In the course of preparing the report, we read literature on economic growth, cities, and density. Here is a reading list for people interested in exploring the subject.
Brueckner, J. K. (2009). Government land use interventions: An economic analysis. In Urban land markets: Improving land management for successful urbanization (pp. 3–23). Springer.
Brueckner, J. K., & Sridhar, K. S. (2012). Measuring welfare gains from relaxation of land-use restrictions: The case of India’s building-height limits. Regional Science and Urban Economics, 42(6), 1061–1067.
Byahut, S., Patel, B., & Mehta, J. (2020). Emergence of sub-optimal land utilization patterns in Indian cities. Journal of Urban Design, 25(6), 758–777.
Carlino, G. A., Chatterjee, S., & Hunt, R. M. (2007). Urban density and the rate of invention. Journal of Urban Economics, 61(3), 389–419.
Ciccone, A., & Hall, R. E. (1996). Productivity and the Density of Economic Activity. The American Economic Review, 86(1), 54–70.
Gill, I. S., & Goh, C.-C. (2010). Scale Economies and Cities. The World Bank Research Observer, 25(2), 235–262.
Haughwout, A. F., & Inman, R. P. (2009). How Should Suburbs Help Their Central Cities? Growth- and Welfare-Enhancing Intrametropolitan Fiscal Distributions. The ANNALS of the American Academy of Political and Social Science, 626(1), 39–52.
Nguyen, H. M., & Nguyen, L. D. (2018). The relationship between urbanization and economic growth: An empirical study on ASEAN countries. International Journal of Social Economics, 45(2), 316–339.
NITI Aayog, & Asian Development Bank. (2022). Cities as Engines of Growth.
Patel, B., Byahut, S., & Bhatha, B. (2018). Building regulations are a barrier to affordable housing in Indian cities: The case of Ahmedabad. Journal of Housing and the Built Environment, 33(1), 175–195.
Rajagopalan, S., & Tabarrok, A. (2019). Premature Imitation and India’s Flailing State. The Independent Review, 24(2), 165–186.
Urban and Regional Development Plans Formulation and Implementation (URDPFI) Guidelines. (2015). Ministry of Urban Development.
Vishwanath, T., Lall, S. V., Dowall, D., Lozano-Garcia, N., Sharma, S., & Wang, H. G. (2013). Urbanization beyond Municipal Boundaries: Nurturing Metropolitan Economies and Connecting Peri-Urban Areas in India. The World Bank.
World Development Report 2009: Reshaping Economic Geography. (2009). The World Bank.
Yasin, M. Y., Yusoff, M. M., Abdullah, J., Noor, N. M., & Noor, N. M. (2021). Urban sprawl literature review: Definition and driving force. Geografia-Malaysian Journal of Society and Space, 17(2), Article 2.
Sargun Kaur and Bhavna Mundhra are researchers at Prosperiti. The authors thank other researchers in the Freedom to Build team at Prosperiti: Bhuvana Anand, Suyog Dandekar, Rohan Ross, Shubho Roy, and Anandhkrishnan S.