Union Budget 2022-23: What is the store for rapidly expanding urban sector?

By Ismail Haque*
On February 1, 2022, honourable finance minister Nirmala Sitharaman presented the union budget 2022, which focuses on key priority areas and gives a clear mandate to ensure exemplary economic growth and inclusive development over the next 25 years – from India at 75 to India at 100. With particular reference to the urban sector, numerous facets subsumed within the same were covered, namely – land and housing, transport, urban development and planning. In terms of budgetary allocations, a sum of INR 48000 crore has been earmarked for the housing sector to construct 80 lakh houses under the ongoing PMAY mission by 2023. The union government also seeks to provide urban planning support to states by establishing five centres of excellence in urban planning with INR 250 crore being provided to each. In addition, states have been allocated a fifty-year interest-free loan assistance of INR 1 lakh crore which will be used for reforms related to building bye-laws, town planning schemes, transit-oriented development, and transferable development rights. Several visionary policy interventions and reform measures have also been announced, some of which have been discussed below.

Key Policies and Programmes and their Strengths & Weaknesses

Announcements such as 48,000 crores for ongoing PMAY mission, 80 lakh new homes by 2023, single-window environmental approvals, better coordination between the Centre and states for approval processes and uniform registration of deeds will help boost the affordable housing market. It will also have a huge multiplier effect on local entrepreneurship, job creation and economic growth. However, PMAY vertical-wise budget allocation and housing intervention would be much more effectual to address the existing housing backlog, especially for the urban poor. In addition, this budget is silent on the recently introduced ARHC scheme for migrant workers and concerted efforts would be required at the policy level to revitalize the rental sector.
Efficient use of land resources is a strong imperative for sustainable urban development. While the digitization of land records initiative is not new, this budget emphasizes a technology-enabled land management system. In particular, it includes features such as the adoption of Unique Land Parcel Identification Number system at the state level to facilitate IT-based management of land records; transliteration of land records across any of the Schedule VIII languages; introduction of National Generic Document Registration System (NGDRS), and the promotion of pan-India single registration software. All of these may be instrumental for greater transparency and accountability in the land transaction process and the smooth functioning of the urban land and housing market. If implemented well, this would give a real boost to the sector.
Innovative financing tools and faster implementation strategies are envisaged for building urban mass transport systems like metro rail. Multimodal connectivity between mass urban transport hubs and railway stations has also been prioritized. However, the introduction of new metro rail projects beyond the large metro areas may not be feasible if we go by the ridership. This is a pain-point of earlier ventures that may need a revisit.
Rapid pace of urbanization poses serious challenges for inclusive and sustainable urban development in India. Therefore, a planned and resilient urban development process is the need of the hour to realize India’s economic potential, including livelihood opportunities for the demographic dividend. This budget recognizes that given large metropolitan cities and their hinterlands are already serving as centres of economic growth, Tier-II and Tier-III cities need to develop as the ‘centres of sustainable living’ with opportunities for all. This is indeed a welcome move and requires a massive paradigm shift in India’s urban planning ecosystem.
As a reform measure, a high-level expert committee will also be formed to make recommendations on urban sector policies, capacity building, planning, implementation and governance. Aside from this, states will get adequate support for urban capacity building especially in the modernization of building bye-laws, effective implementation of Town Planning Schemes (TPS), and Transit-Oriented Development (TOD) plans. This will facilitate states to achieve inclusive and sustainable development for all. However, there is no mention of the future of the ‘smart city’ project in this budget, which was introduced earlier to improve the planning and infrastructure of numerous cities.
It is foreseen that the budget’s announcement of India specific knowledge development in urban planning and design, and the establishment of five centres of excellence providing endowment funds of 250 crores each would have a major impact on the urban planning process and practices.

Missing points/Suggestions

The budget 2022 has paid considerable attention to the key aspects of urban sector, as highlighted above, for sustainable growth and development. While some of the proposed reforms seem to be good, their effective implementation on the ground remains a challenge.

This budget strives to boost the land and housing market through technological interventions, but no big announcement have been made for the real-estate developers as well as home-buyers (tax rebate etc.). In particular, private developers operating in the informal real estate market (both ownership and rental) should be recognized and incentivized to augment the supply for ensuring equitable access to the housing market. Concerted efforts are also required to build a strong supportive ecosystem and centre-state coordination for improving the implementation of the PMAY scheme. In addition, technology can definitely bring transparency, but given the long history of land-related conflicts, ameliorative steps in the form of facilities for local-level negotiations need to be provided.
Secondly, to develop Tier-II and Tier-III cities as centres of economic growth and sustainable living, a concrete plan of action is required. Incorporation of these small and medium-size urban centres under the ambit of ongoing JNNURM and Amrut schemes and diverting investment and development projects towards these cities for strengthening their infrastructure and economic bases may herald sustainable and balanced urban development. In particular, capacity building, adequate financial support to promote vibrant infrastructure development and governance should be the immediate priority.
Finally, inclusive urban development can’t be achieved without recognizing and addressing the issues of informal urban spaces. Effective policy interventions are thus required to improve their current conditions. Like NREGA scheme for rural areas, it would be worthwhile to include National Urban Employment Guarantee Act scheme for the urban poor.
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Associate Fellow at ICRIER, New Delhi