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Maharashtra Needs To Redefine Urban Growth

Monday, April 27, 2015
By Mayura Shanbaug

Maharashtra besides being an economic and industrial powerhouse of the country also leads urbanization in India. It annually contributes about 10 lakh to the urban population of India which is more than 10% of the national level. As per National Census 2011, Maharashtra has the highest urban population of more than 5 crore — the highest among any state. The rate at which urban population in the state is rising, it is envisioned that by the 2022 almost half of Maharashtra’s population of about 13 crore would be urbanized. However, the urban population in Maharashtra is highly concentrated in the western region, specifically in Mumbai, Pune and Nashik region. These three cities together account for more than 50% of Maharashtra’s urban population.

A study by KPMG and NAREDCO highlights some of the key concerns and strives to provide an agenda for action for the Maharashtra government to meet the vision of ‘Housing for all by 2022’.

According to Arvind Mahajan, Partner and Head, Infrastructure and Government Services, KPMG huge influx of population in the three cities has resulted in significant stress on urban infrastructure affecting the quality of life. “Almost half of Mumbai city population currently resides in slum areas without proper access to basic urban services like water, power, sewerage etc,” says Mahajan.

He believes, the state has taken numerous steps in the past to improve the quality of life in cities; however, the desired results have not met the expected results. “Some key issues such as limited growth of new cities, a difficult regulatory environment and delay in execution of key projects may have resulted in deterioration of urban infrastructure in Maharashtra,” he says.  

Mahajan feels that for the state to continue on the urbanization path, it is important that it undertakes significant expansion of its urban boundaries. “Ease hurdles affecting real estate development and promote affordable housing development in the city of Mumbai,” he adds.

By the year 2022, the housing need in Maharashtra is expected to grow to 1 crore housing units (50 lakh each in urban and rural), with more of the housing requirements in the urban regions.

TABLE 1: Region wise housing shortage in Maharashtra (lakh)
Particulars            Rural    Urban
Existing deficit         30        20
Additional need       20        30
Total                           50        50

Source: Census 2011; Planning Commission

Though, the housing need till 2022 is justly distributed between rural and urban regions, the latter require a concentrated effort from the state Government. While, the rural housing could require cumulative investment of about USD13-15 billion, the urban housing could require more than USD200 billion investments. To help ensure mobilization of resources for the mass scale housing development, private sector participation may also be required.

Niranjan Hiranandani, Managing Director, Hiranandani Group, the real estate sector is of strategic importance to Maharashtra’s economy. “It is among the largest contributor to the state’s economy, revenue receipts, employment and a major source of foreign investment. Additionally, the sector has forward and backward linkages with more than 250 industries,” he says.   

It is assumed that the rural housing in Maharashtra primarily requires funding support of about USD10-15 billion, which can be meted out from central and state subsidy to rural families without adequate housing.

“Urban housing requires a deeper intervention such as developing smart and other theme based cities; building new transport infrastructure such as airports, ports, roads and railways; easing the real estate business by streamlining archaic norms and procedures; and finally, rejuvenating  existing cities especially Mumbai,” says Hiranandani.  

In the last decade, there have been reforms across a wide spectrum of real estate issues such as land acquisition, regulation to protect customer interests, opening the doors to foreign investors, and the introduction of Real Estate Investments Trusts (REITs). “While this current wave of innovative energy in the sector has infused new life, there are still a number of issues that need focused attention, failing which the real estate sector will not be able to achieve its full potential,” adds Hiranandani.  

For instance, cities like Thane and Navi Mumbai does not have any significant economic driver. A large number of residents in these cities commute to the city of Mumbai daily leading to excessive stress on urban transport infrastructure.

Experts believe large scale horizontal development of the city of Mumbai may not be sustainable in the long-run, and the government may need to develop new economic centers. In addition to developing and creating new urban centers, the government also needs to rejuvenate the city of Mumbai to improve the quality of life of its citizens.

“It is important that the Government focuses on decongesting these cities by promoting new urban centers by developing necessary transport and economic infrastructure,” says Sunil Mantri, Chairman NAREDCO.  

Mantri says that in addition to developing new cities, the State also need to focus on improving the urban service delivery in the city of Mumbai and Pune. “Special dispensation for affordable housing, slum rehabilitation, rental housing, increasing Floor Area Ratio, expediting approval process etc. needs to be looked into to make these cities world-class. Several policies have been introduced in the past to improve housing conditions; however, the pace of implementing these policies has been slow. The Government needs to take necessary actions and expedite the policy implementation as well,” says Mantri.

The study suggests a four phase strategy to accommodate urban growth.
1) Develop new economic centers or cities:
Economic concentration — which can lead to concentration of jobs — long commute from far-off places and it requires heavy investment in urban transport infrastructure. Maharashtra has a good network of sub-cities around the existing large urban centers. For instance, the city of Mumbai is surrounded by large residential cities such as Navi Mumbai, Thane, Ambarnath, etc. The government could nurture the strength of the local economies of new cities to promote local employment growth. For instance, the government should promote the new cities on basis of particular themes such as tourism, digital, industrial, logistic, airport, etc.

2) Building a strong transport infrastructure:
Development of suitable infrastructure should be a priority for the government of Maharashtra to improve access to new cities. Efficient rail and road network, functional airports, improved connectivity of the non-major ports with hinterlands together with uninterrupted supply of electricity at a reasonable cost can go long way in improving the prospects of future industrialization and urbanization.

Some major infrastructure projects which must be taken up on priority basis are listed below:
For opening up connectivity to new cities and ushering economic growth, a sound road network is essential. Some urgent requirements in this light are listed  below:
–    The existing two-lane national highways must be converted into four-lane

– 150 km long Mumbai-Nashik Expressway must be developed at the earliest

–    Roads connecting district headquarters should be constructed on major traffic corridors to facilitate speedy travel

–    Convert Ratnagiri-Solapur-Nanded-Yevatmal-Nagpur (Major State Highway 6) into four lane National Highway. This project is expected to connect Maharashtra’s rural hinterland right upto the border of Madhya Pradesh, along with the coastal region of Maharashtra. Total investment envisaged is about INR 13,500 crore for the 904 km highway.

–    Coastal Highway i.e. Major State Highway 4 is running along the coastal region of the state parallel to NH-17. This project is expected to significantly improve the connectivity of Mumbai sub-urban cities such as Thane, Navi Mumbai, etc. Total cost for the 787 km two land highway is expected to be about INR 2,000 crore.

The government would have to take the initiative to develop the railway network in the state and improve connectivity. Some key projects which must be taken up on urgent basis are listed below:
–    Ahmednagar-Parli-Vaijanath project as well as Wardha-Nanded-Pusad rail connectivity project costing about INR5,400 crore with state contribution to the extent of INR2,450 crore.

–    Expedite approval process for Manmad-Indore, Wadsa-Desaiganj-Gadchiroli, Nagpur-Naghbir, Gadchandur-Adilabad, Pune-Nashik and Karad-Chiplun railway projects. The Maharashtra government would have to contribute about 50% for these INR11,000 crore worth projects.

There is significant scope of improvement for Maharashtra to reap benefits from its long-coastline. An important port project, promising growth in Maharashtra:
–    The Rewas Project - which is expected to have a cargo handling capacity of about 140 MT by 2020.

Maharashtra needs to develop new international airports in other cities to integrate and complement the transport infrastructure development. Some major projects requiring urgent government attention are:
–    Airports at Navi Mumbai, Pune, Nagpur, and Aurangabad must be developed as international airport. An investment of about INR 1,350 crore from the state is envisaged for these projects.

3) Facilitate a conductive real estate business environment:
The state must ease procedural rigidities and involvement of multiple public agencies to facilitate further investment. Securing necessary approvals for housing projects has peculiar complexities arising due to uncertainties, inter-dependencies and inefficiency in operations of various process workflows and authorities. As per a World Bank study titled ‘Doing Business 2015’, Mumbai is ranked lowest with respect to ‘Dealing with Construction Permits’ globally.

4)    Rejuvenate existing cities:
Heavy urbanization has stressed the urban infrastructure in certain cities, especially Mumbai. For instance, almost half of Mumbai’s population residing in slums with limited access to basic services such as water, sewerage, housing etc. Urgent steps are required to prevent the further  decay of Mumbai.

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