New urban options

A flood of foreign direct investment in real estate is expected, now that the government has eased the restrictions in this sector.

The other enabling development is that the Indian economy is doing well enough to generate substantial demand for both commercial and residential space in both the metros and smaller towns""and everyone knows that India's urban population will double in the next couple of decades.

All of this spells opportunity for investors, including global investors. From a larger perspective, this offers an opportunity for both urban expansion and renewal.

The sorry truth is that India has mismanaged the urbanisation process by queering the pitch for the market for urban land, creating state monopolies, skewing rental markets with one-sided laws and failing to provide the amenities that help urban residents function with reasonable efficiency and live with a modicum of comfort.

It is not easy to change the existing landscape, but new vistas beckon because India can build small new cities next to congested old cities.

With funds chasing projects and the demand for space burgeoning, it is imperative that states straighten out their land laws and land policies.

For, land is the scarce resource, as cement and steel cost the same here as elsewhere, and construction and project management skills are both plentiful and cheap.

Most large Indian cities are hopelessly congested and their renewal is possible only at great cost. Small developments in pockets within them will only increase pressure on the poor infrastructure.

The country needs large new developments; while Indian builders have mushroomed and some have got to a decent size, foreign investment can play a useful role.

These large developments will provide alternative growth centres and thereby ease congestion in the existing centres, while meeting the need for places with good civic amenities and a congenial environment.

But if new towns are to develop speedily, states have a vital role to play in changing the laws that have led to urban disaster and in taking all the necessary steps that facilitate private investment.

For instance, state governments must help acquire the land for development projects that aim for critical mass, allowing infrastructure costs to be amortised within the overall costs.

Within such large projects can exist many smaller projects which can meet the needs and capacities of individual investors and developers.

How states are meeting this challenge for satellite townships has been benchmarked by the experience of the IT and BPO industries.

All states are canvassing for such investments, whereas Greater Noida and Kolkata (at Salt Lake and Rajarhat) are credited with being able to speedily offer prospective investors large plots within planned developments.

They are the ones winning new investments by the likes of HCL and Wipro. On the other hand, Delhi is still to create a private market for land and Gurgaon is beginning to be seen as a development gone awry with inadequate urban infrastructure.

Karnataka is paying the price for failing to develop new growth centres, resulting in worsening congestion in Bangalore.