Real Estate sector needs incentives in this budget for building Smart City mission
Smart cities concept will keep evolving as over 300 million Indians are expected to move to urban areas over the next 20 years. So the abilities of cities to handle the projected population growth in urban areas in terms of alleviating the concerns thrown up by the speed of urbanisation will ultimately be the test for effective implementation of Smart Cities mission.
The task is all the more difficult as each city has its own set of problems so will need a different approach for its transformation to ‘Smartness’. For that the municipal authorities and the Urban Local Bodies need to understand their cities in great depth and require leadership qualities, vision and capacity assistance to act decisively. For, it is at this level that problems could arise in implementation because of lack of finance, technical prowess and talented manpower.
“There is a lot to be done at the state and local government level which is outside the ambit of the central budget. Provision of adequate public transport coverage, sanitation, quick building plan approval, etc. are all subjects which need to be dealt at the local government level,” says Prof. Dr.P.S.N.Rao, Professor and Head, Department of Housing, SPA New Delhi.
“They are the 'last mile connectivity' issues in the urban sector which need to be tackled, without this, no amount of central government initiatives can bring about any meaningful change in our urban scenario,” Rao says.
Also, as there are several core elements that combine to make up the infrastructure of the Smart City mission, efficient collaboration among its different stakeholders (Public Private Partnership) could avoid time lags. The government should also come up with a firm legal framework so that multiple stakeholders are bound to work in a timely manner. Another challenge is the communication flow between the city custodians and policy drafters.
Brinda Somaya, Principal Architect, Somaya & Kalappa Consultants says: “The problems of urban development are enormous in scale so there is no doubt that there has to be acute decentralisation in all verticals and yet something has to hold us all together.
The role of young people is most important and I have seen the brilliance in the Architecture and Planning schools I visit. They are all hungry to help in the development of the country and so frustrated with the red tape involved making any ideas of these non-implementable.”
Citing the example of Cape Town, she says she was amazed to see how the city has developed, renewed itself and built urban housing for the poor. “It is clean and walkable...something not one of our cities is. It has been done with government and the citizens of the city and the state. Unfortunately we want to only build statues and live in the past.”
“The solution will be to be able to work on many scales with many groups… the government, the bureaucracy and civil society… all being equally important and empowered. Only then will the god of small projects work with the god of large projects together and create cities that work for all Indians.”
“Budget 2017 has to give incentives to the real estate sector, bearing in mind the Smart City Mission, AMRUT and HRIDAY. In order that this is taken forward further, this budget should reduce the duties on cement and steel so that the cost of construction can be reduced. Also, in order to speed up construction, prefabricated technologies should be given more tax incentives. Green buildings should also receive tax exemptions so that construction of the same can be incentivised. These measures can go a long way in achieving the objectives of Housing for All,” says Professor Rao.
India needs two things, Arvind Nandan, South Asia Director, Valuations & Advisory at Colliers International India, points out: “Large-scale investments and a sharp rise in technology enabled real-estate services. The government must provide a favourable road-map for FDIs and domestic funds. Among key-steps, providing faster approvals and tie-ups will be important.
Secondly, Nandan points out, technology is the main enabler for creation and operations of new urban centres. It is highly desirable that the government focuses – in this year’s budget – on incentivising tech-enabled services like consulting, fund-raising, infrastructure-design & implementation, traffic & transportation planning services, feasibility and appraisal services, etc. Moreover, it will be useful for the government to provide necessary platforms for tech-enabled ideations from the large section of experts in the industry. A vital ‘missing link’ today is the lack of a mechanism for tapping the brain-power available in the country and globally. With the government’s keenness on making Digital India a success, this should be necessarily established for smart-cities.”
The funding mechanism would have to be re-evaluated. Kishor Pate, CMD - Amit Enterprises Housing Ltd, says, “The financing requirements for smart cities are huge, and the government should find ways to make this an investment opportunity even for normal citizens. One such way would be for the Budget to announce something along the lines of municipal bonds, which allow purchasing citizens to lend money to the local government in return for specified amounts of interest and the eventual return of the principal on maturity. Such an instrument would allow citizens to become invested in the Government's Smart Cities mission not only financially but also psychologically.”
More than funding, a larger challenge during the implementation of Smart Cities Mission in India is reforming the Urban Local Bodies to make them capable of independently generating their own funding, says Shubhranshu Pani, Managing Director - Strategic Consulting, JLL India. Our suggestion to the finance minister for budget 2017-18 would be to put into practice a clear roadmap on digitisation of the ULBs and database management at the ULB’s daily activities level. Till this happens, states will have to act as guarantors for investments made by private companies.
Pani says, Infrastructure financing (via Infrastructure Investment Trusts or InvITS) is yet to take off in a big way in India. “Given the sector’s importance in the success of several priority sector areas such as affordable housing, smart cities etc., the budget should possibly announce measures to further assure investors of adequate stable policies from the mid to long term. The government also should add transit-oriented development and municipal infrastructure with similar solutions like road and rail infrastructure.”
The key to success of Smart Cities mission will be good governance and service delivery in supplying and managing urban amenities, and customisation of adaptable technology solutions to suit different economic and social environments. No technology can make the system work better if basic services don’t exist. Smart cities should be able to fulfill increasing urban needs with a long-term vision. Also, the approach should be for smart solutions.
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