Mumbai is the densest major city in the world. Over five decades ago, urban planners reduced Mumbai’s floor space index (FSI, or The ratio of floor area to the area of the plot) to lower the population density of the city. Now, in much of Mumbai’s central city, the maximum built-up area permitted on a 1,000 square feet plot is merely 1,330 square feet. Urban planners believed they can decongest Mumbai by restricting the development of floor space in the city. But, this did not happen. Instead of preventing migration to the city, this made Mumbai’s real estate unaffordable to most migrants. People did not stop migrating to the city of dreams for the numerous opportunities it offered. They settled down in confined spaces and made the city their home. Those who could afford Mumbai’s expensive real estate bought homes; rest created the slums.
In cities across the world, to allow redevelopment of buildings, when FSI restrictions were imposed, the permissible FSI was set above the FSI of existing buildings. In global cities, when population density increased, FSI levels were raised too. But, in Mumbai, neither was true. Since 1964, the FSI in Mumbai has declined. In 1964, the FSI in Nariman Point was 4.5. Today, in much of Mumbai’s Island City, the FSI is 1.33.
We need not invent new technology to raise Indian wages to global standards. It is, of course, true that wages depend on technological advancement. But, India can make technology that exists all around the world accessible to everybody by making its cities attractive to foreigners and global firms. Modern technology can be made accessible to even the least-skilled workers by allowing rural Indians to migrate to such cities. To cut a long story short, India can raise its wages to global standards by being more urbanised. This is already happening. According to the World Bank, by 2050, 75 per cent of India’s 1.6-billion population would be urbanised. member: In contrast, according to the World Health Organization (WHO), merely 70 per cent of world population would live in urban areas by 2050.
The urbanisation process in India has been very slow for much of the history. But, today, urbanisation in India is faster than in most parts of the world. India is likely to witness the highest surge in urbanisation in the next few decades, even greater than China’s. When more people live close to each other in urban areas, there will be greater trade, production and foreign investment. No economist doubts that India needs greater urbanisation, at a much faster pace. But, for this to happen, policies in cities like Mumbai, Bengaluru and Delhi should improve. If the policies in cities like Mumbai or Bengaluru do not attract global firms, they will take their businesses elsewhere. India needs gateway cities.
Our relationship with cities is very similar to that of with our own children. People love their cities. They tend to cherish features that outsiders rarely find inspiring. This is even truer of large, unique cities. Priya Suhas loves everything about Mumbai, including the potholes on roads and eunuchs who ask for money at traffic signals. In the city everybody considers a congested concrete jungle, she has found open green spaces. Floor space in Mumbai is more regulated than most places in the world. But unlike many other architects in this city, she does not feel any compulsion to knock off superfluous walls or to turn her balcony into a window ledge seating. She loves everything the city has to offer. Priya Suhas is a talented production designer and architect who has worked in movies like Dirty Picture, Saathiya and Bhoot.
Mumbai’s Dharavi, one of the world’s largest slums, is a standing testament to the view that urban planners have little control over the population density of an area. When people wish to migrate to an area where land supply is scarce, population density is bound to rise, irrespective of how stringent building regulations are. Due to this, population density is the highest in low-rise settlement areas like Dharavi and not in the areas in Mumbai where there are high-rise buildings. In fact, the population density of Dharavi is many times of that of Mumbai. Even though there are no formal studies, Dharavi houses about 300,000 to a million people in a 557 acre area. In , the population density is 3,230 people per hectare. But, in Chamra Bazar, the most populated neighbourhood in Dharavi, population density is 44,460 people per hectare.
For years, former World Bank researcher Alain Bertaud tirelessly argued that India is the only country on earth where building height regulations are imposed in large cities without paying any attention to demand for residential property. It is largely because of Alain Bertaud’s efforts that many Indian urban policy makers now tend to think that floor space index (FSI) values should be higher in Indian metropolises, especially in Mumbai. An important lesson Indian policy makers ought to learn from Bertaud is that for the mass transit to work, a city should have a vast population concentrated around main mass transit corridors. Without the right land use policy, right pricing and efficient residential property markets, mass transit systems will not be successful. The transportation networks in a city must adjust to the spatial structure of a city and needs of its people. Another important lesson Bertaud has to teach us is that vehicles and ox carts occupy expensive land in Indian cities without paying for it. India needs to allocate real estate in cities more efficiently. Harvard Economist Edward Glaeser once said that he learned everything he knows about land use restrictions in developing countries from Alain Bertaud. Anyone who rigorously studied real estate markets in developing countries would probably agree with Glaeser because there are few other guideposts to find.
Urban planners rarely pay attention to residential real estate markets. But, it is impossible to plan the development of a city ignoring real estate prices. They are a source of valuable information. Recently, Union Urban Development Minister Venkaiah Naidu said the government would extensively consult citizens to plan cities. However, even if urban planning is done after consulting citizens, all their needs and preferences may not be met. The reason is, of course, that residents of a city need not have all the information that is necessary to give reliable answers. Moreover, in many cases, they may act on information they have not yet verbalised. For instance, residents of an area may believe that crime rates are high where they live. However, high residential property prices in the neighbourhood may suggest that this is probably not true.
Nirvikar Singh teaches economics at the University of California, Santa Cruz, and has been an advisor to several startups in the Silicon Valley. One of the most talented economists of Indian origin, Singh’s areas of research include information technology, electronic commerce and economic reforms in India. In an exclusive interview to PropGuide, he discusses the Indian government’s plans for the infrastructure and real estate sector in India and proposes an alternate plan for developing the low cost residential projects.
PropGuide: What are the major flaws in India’s land use policy?
Nirvikar Singh: In India, land ownership and titles are not well-documented. Land markets are imperfect with very high transaction costs, including those imposed by the government. There is a tendency to neglect the externalities associated with the development of the land. These externalities include the costs a developer imposes on existing power, roads, water supply and sewage infrastructure. Taxation is inadequate (especially property tax) to cover maintenance of the necessary infrastructure. India’s land use policy is completely dysfunctional.
When we think of creativity, bricks, mortar or mortgage-backed securities rarely cross our minds. But, building structures and the instruments of finance are as much a product of creativity as the pinnacles of artistic achievement. Buildings are also a major driving force behind human ingenuity.
Creativity requires building, but countries cannot build their way into creativity. Creativity requires high density building, but people with overflowing creativity rarely work in the densest of buildings. Creativity requires proximity, but much of what we call genius is the ability to work in isolation. Exquisite design is the antithesis of ugly, but aesthetics wouldn’t flourish in societies that do not tolerate ugly buildings. To design institutions and offices, we need such a nuanced understanding of the people who inhabit them.
While driving on the roads, we do not usually feel pangs of guilt. But, in Mumbai where there are nearly 700,000 cars on the roads, perhaps an examination of conscience is in order. In South ’s Null Bazar, where the average street area per person is 1.7 sq mt, vehicles impose huge costs. Ox carts come at a price too. Transport is a real estate problem, but urban planners rarely see things this way.
A parked car consumes nearly 14 sq mt of area. A car that travels at 30 km per hour consumes 65 sq mt of area. In New York Mid-town, where the average street area per person is 33.3 sq mt, a car that travels at 30 km per hour barely occupies the space of two people. In Mumbai, it occupies the space meant for 38 people. In the past eight years, the number of cars on Mumbai’s road have grown by 57 per cent. Mumbai’s existing infrastructure seems to be crumbling with its growing population.
The Economist called Mumbai ‘The Minimum City’, directly challenging Suketu ’s fabled expression – ‘Maximum City’ – for the commercial capital. This is an unfair judgment because Mumbai with its population of 1.84 crore is indeed the most affluent city in India. Mumbai contributes to 6 per cent of Indian GDP, and shelters less than 1.5 per cent of its population. Even ’s slums are far more productive than the quaint villages its inhabitants left behind.
But, real estate in Mumbai is almost as expensive as real estate anywhere in the world. In some ways, then, Mumbai is, indeed, ‘The Minimum City’. Mumbai’s buildings can’t reach the skies (though they should, for the city’s growing residential needs), its greenery is sparse and living spaces congested. In , the city of India’s hopes in Mehta’s celebrated book The Maximum City, infrastructure is minimal.
Mumbai, India’s most affluent city, contributes to more than 6% of India’s economy. But, if its infrastructure were adequate, the financial capital of India would have been more prosperous. While this modern metropolis without a doubt deserves far superior infrastructure, one of the most fervent arguments against raising the floor space index (FSI) – the instrument that would allow buildings to get taller in Mumbai – also stops at its “woefully inadequate” infrastructure.
It is true that a high FSI would make certain parts of Mumbai denser. This is an argument that deserves sober attention. But, the costs of developing better infrastructure in Mumbai will be outweighed by the benefits of residential and commercial real estate becoming more affordable when the FSI is raised. Even if this is not so, the arguments in favor of developing infrastructure would carry much weight.
Most major cities in the world have a ring road or a rapid arterial road that allows residents to easily commute from one part of the city to another. But, Mumbai does not.
In the developed world, urbanization is near-complete. But the developing world will add nearly five billion people to its cities in the next hundred years.
India is one of them, and a prominent one.
Urbanization has never been so rapid before. In India, urbanization is faster than in any other country in the world. The story that runs parallel to urbanization is migration, which gives the big cities their much-needed labor force. Those who move, are catalysts of change. With them, local economies, businesses and government and non-government enterprises thrive.
But to live in cities that allow people to reach their highest potential, migrants often have to find homes in mud-floored shantytowns with or without basic amenities. To commute to work, especially in cities like Mumbai, they often risk their lives hanging outside trains.
With urbanization, the average living space doubled in the developing world. But, in India and much of the developing world, living spaces have shrunk, spawning slums on a large scale.
India needs more cities.