After the change in the State government, several parts of Delhi have witnessed demolitions of slums. These demolitions may go on in Delhi and elsewhere but even if these come to a halt, we have a very serious problem nevertheless. Demolitions are painful but they are also a visible reminder of an ongoing, otherwise silent, and deep-rooted problem. Life in slums and even in many unauthorised constructions is, all said and done, difficult, unhygienic, unsafe and even inhuman.
The future of an entire generation that grows up there is often at stake, and there are many negative “externalities” for the city at large. It is not just Delhi. Nearly half the urban population in India lives in slums! And, possibly another 10-25 per cent people live in, what are, in one way or another, unauthorised constructions.
Why? Property prices are, by and large, very high in the big cities. So, a market for illegal or semi-legal real estate arrangements evolves at various levels. The price for such an arrangement is relatively low. This is a parallel housing “system” alongside legal housing. And, there is corruption and harassment. But there is also an understanding on the part of public authorities, many of whom are in a dilemma.
There are, broadly speaking, two views on this whole matter. First, because many real estate developments are illegal and cause negative “externalities”, these should be demolished. Second, the users are poor or not well-to-do, and so they should be allowed to stay. There is a dilemma. And, yet this whole way of thinking is actually missing the larger picture!
Effectively, the focus is usually, if not almost always, on the short term. It is time that we started thinking seriously about a long-term meaningful solution. It is true that such a solution can take 5-10 years and possibly even more. But we need to make a beginning at some stage, if we don’t want the problem to become bigger.
The heart of the problem is limited supply of housing, and this is basically for policy reasons. Now extending the existing big cities is very messy, and very costly. So, we need to think of a solution outside of the existing big cities. We need new cities, or extensions of existing small cities. We may treat these too as new cities.
Smart cities
An important mission of the Union government in 2014 was to build 100 new cities which would also be smart. Soon enough, however, there was a shift to a mission under which 100 mostly existing cities would become smart. The idea of 100 new cities was, broadly speaking, shelved. The main reason seems to be that public money and state capacity are limited, and so this was a nearly impossible mission. But there is another route; this is mainly through an enabling public policy to build some new cities.
Consider economics. It is true that developing new cities has a very high opportunity cost. It is even debatable whether we should have new cities. Note, however, that this approach assumes that the resources are at present, more or less, fully utilised. But this is not true. We have, in India, underutilisation and inefficient allocation of the various factors of production — land, labour, capital and organisation.
As an example, the top 10 cities occupy only about 0.2 per cent of the land mass! This is contrary to the common perception that there is a shortage of land for urbanisation. We have massive under-allocation for cities, which is where the value of (raw) land is very high. This is tantamount to serious underutilisation. It is true that the Land Acquisition Act, 2013 can come in the way of developing new cities.
However, if we make a very big change in policy, then it is not just about affordable housing, and decongestion in the existing cities. It is also about higher economic growth and greater employment. And, a big change in policy can itself pave the way, or at least make it less difficult, to amend the Land Acquisition Act, 2013.
This is not the space to get into the detailed economics of why it is actually less difficult to make an improvement in the utilisation and allocation of resources by developing new cities, instead of a substantial improvement in some other sector of the economy. But it will help to elaborate a little on the use of one of the factors of production here — labour in developing the new cities.
Jobs angle
A new city can come up — with possible hiccups — over what is now a rural area. The density of population in rural India is, understandably, low. This obviously means that when there is the development of an entire city over some (now) rural area, there is a need for hiring people from outside. Where can these people come from?
In the existing cities we have not only people who live in bad conditions in slums, and even unauthorised constructions, most of these people also have odd jobs, under-employment, and low incomes. There is scope then for a mutually beneficial and voluntary “trade”.
Some of these people can shift to the new areas and get better occupations, close to full-time jobs, higher incomes, and cheaper, decent and legal housing. And, the new cities are useful for absorbing other people in the future as well.Urbanisation in India is only at 34 per cent. Anyway, it helps to have new cities. In conclusion, the way out of the problem of slums, and unauthorised constructions lies mainly in the creation of new cities, which is possible. Sooner or later many people need to live and work there.
The writer is an independent economist. He has taught at Ashoka University, ISI (Delhi) and JNU
Published on July 19, 2025
