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.
If a city is situated inland, or on a straight coastline, it is easier for it to expand. But, Mumbai is situated on a narrow peninsula, surrounded by water on three sides. Mumbai was a city built on a peninsula because the Bombay Port Trust found it easier to install a port here. Nariman Point was situated on a narrow peninsula. Mumbai’s earlier CBD, Ballard Estate too was built on land reclaimed from the sea. A whopping 66% of the area within 25 kilometers from the city center is covered by water. This is not true of similar Asian cities. In Jakarta, it is 22%. In Seoul, it is 5%.
The built-up area of Mumbai is even less. Within 25 kilometers from its earlier city center, Mumbai’s built-up area is 212 sq. km., while it is 1438 sq. km. for Jakarta and 360 sq. km. for Seoul. New York, Singapore and Hong Kong are built on islands too, but such cities have skyscrapers. In contrast, Mumbai – a city that cannot build out – does not build up either.
On the World Population Day, India’s population was 127,42,39,769. If India’s population grows at the rate of 1.6%, India would be the most populous country on earth by 2050. Much of India’s miseries are blamed on its large and rising population. Many believe that Indian cities are congested and homes unaffordable because Indian population has grown. But, is this true?
In the past fifty years, economists have come to agree that a large population is an asset, and not a liability. Africa is the least populated continent. Europe is the most densely populated continent. But, Africa is poor, and Europe prosperous. Almost all African cities face a shortage of residential property. Traffic congestion in African cities is great too. India is no different. In Mumbai, the living space per person is 4.5 sq. mt. Since 1951, Mumbai’s population has grown from 2.96 million to over 20 million today. But, if building stock rises faster than population, living space would rise too. In Shanghai, the most populated Chinese city, floor area per person in 1984 was merely 3.6 sq. mt. But, in 2010, it had risen to 34 sq. mt per person. But, in this period, Shanghai’s population had grown from over 12 million to 23 million. Why?
In 1984, Shanghai made raising floor space a priority. Mumbai never did.
When a revolution happens, people rarely notice. There might be one taking shape with the way cab services industry in India is evolving. Cheaper, hired cab services like Uber will increase the radius of Indian cities, allowing people to live in areas that are still not connected to railroads or the metro lines. With Uber, there will be more efficient price differentiation in real estate in India. Suburban dwellers and firms located in suburbs would consume more real estate. Many new firms will come into existence. People in metropolises in India will consume more floor space when there is greater migration to suburbs.
Cheaper, hired cab services like Uber will increase the radius of Indian cities, allowing people to live in areas that are still not connected to railroads or the metro lines. With Uber, there will be more efficient price differentiation in real estate in India. Suburban dwellers and firms located in suburbs would consume more real estate. Many new firms will come into existence. People in metropolises in India will consume more floor space when there is greater migration to suburbs.
New York Times journalist Gardiner Harris recently left Delhi because he found the city too polluted for his children. He is right – Delhi is the most polluted city in the world, according to the WHO. Of the 25 most polluted cities in the world, 13 are in India. Many attribute pollution in Delhi and other Indian cities to urbanization, population growth and greater vehicular intensity. But, there is a near-unanimous consensus among environmental scientists and economists that in large global cities, environment has improved with urbanization, population growth and vehicle ownership. Urbanization and population growth have, in fact, contributed to improvement in environmental quality. According to WHO, Delhi’s atmosphere is 8-20 times more polluted than that of large world cities with comparable vehicular intensity.
It is true that urbanization comes with its own set of problems. But, with good infrastructure and tall buildings that areresults of urbanization, first world cities were able to get around them. For instance, infrastructural growth facilitates migration to suburbs, reducing crowding. When there are better roads and railways, people need not live in the city to have access to its amenities.
Since Independence, the vehicles on the road have changed remarkably. Today, drive is far more comfortable and smooth. Vehicles are more visually appealing. The economic argument, of course, is that when vehicles are privately produced, there will be greater competition, innovation and efficiency. In contrast, India’s publicly run trains and railway networks have not changed much. But, this might soon change, if recommendations from a committee chaired by eminent economist Bibek Debroy are to be implemented. The cost of a publicly run railway network is enormous. Such cost is also intimately connected to real estate in India. Let me explain. Every day, nine people die on the Mumbai suburban railway network while accessing India’s most prosperous city. They would perhaps have been alive if they could afford valuable real estate in Mumbai. But, the city has the most stringent building height restrictions in the world – in congested Mumbai, there are greater limits to the number of floors developers can add to their residential projects than in large global cities. So, those who can not afford expensive apartments in the heart of Mumbai live far and hang precariously on the trains to reach workplaces in Mumbai.
The wrought-iron curtain rod seems unremarkable. But, a century ago, wealthy connoisseurs could not have built them without interior designers. When the rest of the world heard about how the wealthy lived, they wanted it too. Over the years, their desire for the unattainable blurred the boundaries between luxury and necessity. The wrought-iron curtain rod once had more to do with fashion and luxury than with privacy. Today, not one man in a million would notice this. But then, privacy too, was once a luxury.
Today, while watching Fashion TV in the privacy of our rooms, we do not notice that without such instantaneous transmission of information, luxuries would never become necessities. Even the privacy of our own rooms would not have become possible. But, architecture and fashion are as dependent on each other as they are on instantaneous transmission of information. Architects and fashion designers have so much learn from each other because both strive to create aesthetically appealing, habitable structures.
In India’s most prosperous city, half the population lives in slums. In Savills’ top 12 most expensive cities in the world, Mumbai was the cheapest city to live in. Yet, real estate in Mumbai is the most expensive in the world in relation to per-capita income*. At first glance, this is paradoxical. But, there is more to this than meets the eye. Property in Mumbai is very expensive because government policies have made it so. Half of Mumbai lives in slums because like all prosperous cities in the world, this city attracts people who aspires to live here at any cost, under the most trying conditions.
Every day, on an average, three people die while traveling in trains in Mumbai. Much of the city’s population lives in congested spaces where diseases spread too quickly. This is not true of comparable cities in the world where density is very high. In New York City, for instance, people who commute to work are far less than in any other city in the US because high FSI levels allow them to live closer to office. When builders go for vertical development, diseases would not spread easily because it is easier to ensure that water supply and other utilities are working properly. People in Mumbai would live longer and far more comfortably in more spacious homes. The local authorities merely have to raise the FSI figures manifold.