Potential opportunities and hidden hurdles in developing Smart Cities

As increasing urbanisation overburdens the infrastructure of existing cities, Smart Cities are the best way forward to address the concomitant problems.

Barely six months ago, few would have dared to suggest that perceptions about India would be transformed worldwide within months. Yet, as Prime Minister Narendra Modi unveils a slew of incremental and far-reaching reforms, almost overnight, the nation is turning into a lightning rod of opportunity for entrepreneurs and investors from India and abroad. Possibly the biggest opportunity of all could be the PM’s vision of creating 100 Smart Cities across India.

Unlike traditional brick-and-mortar cities, the core concept behind Smart Cities is digitisation and the use of smart technology. Be it water, electricity, gas, sewage, solar power, transport, rainwater harvesting, recycling, etc., smart technology powers all operations, with many of the systems being part of an overall network. As smart technology operates these facilities and utilities, real-time monitoring ensures savings of up to 30% due to controlled usage and lower wastage.

Multiple Challenges

While this sounds simple on paper, there will be many hidden hurdles along the way. The first challenge that will arise is the wherewithal and expertise required to create such Smart Cities. Although the Union Budget in July earmarked Rs70 billion (approximately $1.2 billion) for the 100 Smart Cities, this can merely be considered seed money to kick-start the grandiose project. The Government will need to allocate progressively higher amounts in subsequent Budgets, apart from easing foreign direct investment norms and making REITS (Real Estate Investment Trusts) more investor friendly via lower tax liabilities.

Of course, some of these steps are already on the anvil, while others have been announced. For example, the Cabinet recently lowered the minimum floor area from 50,000 sq mt to 20,000 sq mt and reduced the minimum capital requirement from $10 million to $5 million. Such measures will help the realty sector attract more FDI, which fell 8% to $1.2 billion in 2013-14 from a year earlier. If India becomes an attractive FDI destination in real estate, it will boost the Smart Cities program and bolster the nation’s infrastructure development.

It is also important the Government utilises the services of private players and foreign partners in building Smart Cities, which could include public-private partnerships. Undoubtedly, a project of this magnitude simply cannot be left to a single stakeholder, especially since the nation has not yet created a fully-operational Smart City, though Lavasa near Pune may vie for this distinction.

As India’s economy and society gradually transition from a rural existence to an urban-centric one, the creation of Smart Cities would ease the rising burden of its inadequate infrastructure. The strain from the rising influx of immigrants can be clearly seen in cities such as Mumbai, where the infrastructure struggles to keep pace with the burgeoning populace.

Foreign Partners

Building Smart Cities on the outskirts of existing cities will help reduce their burden. In fact, the 100 Smart Cities are planned to be built as satellite townships around the larger cities. Some of these will come up along the Delhi-Mumbai Industrial Corridor, the Chennai-Bangalore Industrial Corridor and the Bangalore-Mumbai Economic Corridor. With the Japanese Government already involved and investing in some corridor projects, the island-nation will also help in building Smart Cities. During his visit to Japan in August, PM Modi signed an MoU with Japanese PM Shinzo Abe to transform Varanasi into a Smart City with help from the Japanese city of Kyoto.

Similarly, India will utilise the expertise of Singapore to build other Smart Cities. The smart city-state has already expressed its desire to partner the country in developing these cities, which includes the building of a new capital for the residual Andhra Pradesh. Such help will include the creation of Intelligent Transport Systems, e-urban governance, water management, recycling and solid waste management.

In India, Smart Cities can be built via greenfield (from scratch) or brownfield projects (transforming existing cities). Given India’s space constraints, such cities could be vertical or horizontal. Landlocked Singapore is a good example of a vertical Smart City, while Abu Dhabi’s Masdar would qualify as a horizontal Smart City. Mumbai could follow Singapore’s example in order to become a Smart City.

Creating new Smart Cities would, however, be less time-consuming and less expensive because smart technology could be incorporated in the planning and development phase itself. Incorporating such technologies in established cities with old infrastructure may even entail uprooting previous systems but would nevertheless be the best way to transform such cities. But to create greenfield Smart Cities, the Government needs to revise the stringent norms of the new Land Acquisition Act, since these make it virtually impossible to acquire land speedily and at reasonable rates.

With India’s urban population expected to soar from 286 million (2001) to 534 million by 2026, Smart Cities would be just the right solution to ensure immigration from rural to urban areas happens smoothly and seamlessly.

Vineet Relia, Managing Director, SARE Homes

The views expressed in this article are author´s own