Building Smart Cities in India

January 30, 2014

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Agenda

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What great cities do?

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Imperatives for Indian cities

McKinsey & Company | 1

 Last Modified 30/01/2015 00:27 India Standard Time
Public safety
Healthcare

Jobs and businesses

Air quality
Housing
Entertainment
Greens and
Transportation recreational spaces

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Education

Every city can be a good city…

McKinsey & Company | 2

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| 3
McKinsey & Company
…but what makes a city great?
 Last Modified 30/01/2015 00:27 India Standard Time
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From our studies of great cities,
we learned that… McKinsey & Company | 4
While there are many paths to greatness, great cities do three things well

Great cities…

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Achieve smart Lead, inspire,
Do more with less
growth perform

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Let’s explore how…

McKinsey & Company | 5

Our findings show that great cities excel in three ways which sets them
apart from good cities

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Great cities …

1 Grow smart 2 Do more with less 3 Lead, inspire, perform

▪ Develop an economic ▪ Leverage all financing ▪ Build a personal vision:
strategy: Focus efforts on options: Maximize revenue Design a legacy built on
strategic industries collection and explore new personal passion and priority
▪ Promote opportunity and financing models issues impacting the city
livability: Connect ▪ Introduce investment ▪ Build a winning team:
residents to jobs and create accountability: Prioritize, Attract and retain the
a safe and enjoyable city to manage and govern capital best talent
live in investments ▪

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Create an accountability
▪ Renew the environment: ▪ Use technology to improve culture: Execute
Reduce GHG emissions city services pragmatically with an eye
and improve air and ▪ Actively assess and towards driving impact
water quality manage expenses: ▪ Forge stakeholder interest
Improve cost transparency and trust: Stakeholder
▪ Stop wastages and engagement through data
leakages in all government transparency, and multi-
services sector partnerships

SOURCE: McKinsey McKinsey & Company | 6

GROW SMART – DEVELOP AND ACTIVATE ECONOMIC STRATEGY
Bogota – Attracting foreign direct investment

Government-level intervention

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Situation (2001) Impact
(2006)
▪ Bogota was ▪ Invest in Bogota was created as ▪ Invest in Bogota
recovering from two a public-private partnership successfully increased
decades of civil war between the Bogota Chamber of economic activity and
▪ The private sector Commerce, the Bogota City foreign investment in
had lost confidence Government and the Government the city
and stopped of Cundinamarca, with support – FDI increased, reaching
investing from the World Bank $6.8 billion in 2010
– FDI totalled only – MNCs almost doubled
$ 2.5 billion – 3,600 new technical
▪ Unemployment rate jobs in the city created

Printed
was 18.2 % – Investment projects in
the city tripled
National government
intervention helped to
reduce the unemploy-
ment rate to 9.7%

SOURCE: World Bank; Invest in Bogota McKinsey & Company | 7

GROW SMART – DEVELOP AND ACTIVATE ECONOMIC STRATEGY
Luxembourg City – Treating businesses as clients and adopting
client service approach to attract businesses

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Situation Mayor – Intervention Impact
▪ When Mayor ▪ Mayor Helminger initiated a ▪ Impact on business
Helminger (1999- review of citizen and business environment
2011) took office in services and introduced new – Number of days to
Luxembourg city, customer interfaces in 2001: open a business has
there were 50 key – “Espaces Enterprises”, a fallen from 26 days to
service processes for one-stop-shop for startup 19 days, because now
businesses all forms can be
citizens, which were
complex to access;
– Bierger-Center where all completed in a one-
services are centralized to stop-shop
little integration
simplify dealings with city – Cost to open a
across city
– eBerger-Center, which business has fallen

Printed
government provides birth, death, by 90%
agencies marriage and residence
certificates

SOURCE: Interview with Former Mayor Helminger; Doing Business Report; PWC report 2006; web-search; team analysis McKinsey & Company | 8
GROW SMART – PROMOTE LIVABILITY AND OPPORTUNITY FOR ALL
Singapore’s urban livability strategy has been recognized as one
of the best among sister Asian cities
Situation Intervention Impact

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▪ Growing population ▪ Education: ▪ Ranked the 3rd
with changing – ~20% total budget spent on education most livable city
demographics: – Literacy rate: 95%; average years of worldwide, in the
– Population is schooling: 9 Global Livable
expected to reach ▪ Safety: Cities Index by the
6.5 million over the Centre for Livable
– Strict laws regulating behavior
next 50 years Cities
– Strong surveillance, i.e., Neighborhood Police
– By 2050, Singapore’s Posts operate 24/7 in densely populated
median age will be housing estates
54, making it one of
the demographically ▪ Affordable housing:
oldest countries in – State owns 90% of land, government
the world provides cheaper financing and subsidies for

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lower income residents
– Diversity of home designs, mixed-use
▪ Resource constraints: developments
– Singapore’s land ▪ Green spaces:
area expected to
increase by 25% vs – 10% of city land set aside for green space
population increase – Developing 843-acre park, costing > $795 M
by 250% ▪ Aging and wellness:
– Public-private partnerships to expand
healthcare offerings

SOURCE: Centre for Liveable Cities (CLC) and the Urban Redevelopment Authority (URA) McKinsey & Company | 9
Barcelona’s SmartCity Centre of Excellence
What is Smart City Campus-22@Barcelona? Smart city segments addressed
▪ 22@Barcelona launched in 2000 ▪ 22@Barcelona is home to 5 knowledge/technology

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Project ▪ Located in historic (dilapidated) cotton intensive clusters; ICT, media, bio-medical, energy,
overview district of Sant Marti and urban design
▪ During the Smart City Expo in 2011,
▪ The project had 5 primary aims
the Mayor announced the launch of a
SmartCity campus to be the – Improve mobility (focus on EV)
headquarters of all companies related
to smart cities in Barcelona – Increase overall energy efficiency
▪ Partnerships:
– Create comfortable, safe buildings
– 5 companies signed an
Partnership agreement with the Ajutament de – Obtain maximum efficiency in water
involvement Barcelona
management
– Partners to roll out services and
infrastructure and to implement – Improve connection between citizens
sustainable urban management
and local authorities
projects
– Schneider Electric to create a

Printed
22@Barcelona actual results
SmartCity Centre of Excellence in
the Campus ▪ New companies installed in the district between 2000
and 2009 – 1,502 (41.8% newly created)
▪ Investment in infrastructure of the
▪ New jobs installed in the district between 2000 and 2009
entire 22@Barcelona District:
– 44,600 (61.7 newly created)
– A total of 200 million Euros
Financing
(2000 – 2010) ▪ A 23% increase in residents since project inception
– Mainly from private investors 22@Barcelona anticipated results
(60%), with another 10% from
municipality, and 30% from future ▪ Employment target of 100,000 new jobs with 20-25% of
public users workforce coming from the international community

SOURCE: barcelonacatalonia.cat; 22@barcelona innovation district and the internationlisation of business; Case study:
McKinsey & Company | 10
22@Barcelona Innovation District – Sustainable Cities Collective
GROW SMART – RENEW THE ENVIRONMENT
Seattle – Moving towards zero-waste through a variety of policy
levers

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Situation Mayor Intervention Impact
▪ In the 1980s, Seattle ▪ Key components of the ▪ 10.9% of waste sent to
committed to recycle a strategy are: landfills in 2009
minimum of 60% of its – Incentivizes for producers who (352,000 tons)
solid waste use reusable / recyclable
– By 2004, waste materials
diversion rates did not – Mandatory food waste
exceed 43% collection
▪ City council adopted a – Ban the use of Styrofoam and “Seattle is an
long-term zero-waste plastic bags environmental leader
strategy – Solid waste facility re-designs in the United States,
– 60% waste diversion to emphasize better waste and our commitment

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rate by 2012 prevention, recycling and to waste reduction is
– 70% waste diversion disposal systems in the future unparalleled”
rate by 2025 Council member
O’Brien, Jan. 2010

SOURCE: City Council of Seattle: http://www.seattle.gov/council/issues/zerowaste.htm; press search McKinsey & Company | 11
DO MORE WITH LESS
New York – Engaging citizens through technology

Situation Mayor-level intervention Impact

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▪ New York City is a mega-city ▪ Mayor Bloomberg came into office with a ▪ Created robust reporting mechanism
– $60 billion budget mission to create a more effective, to help make informed decisions
– 350,000 city employees more efficient and technologically- – Tracks 4,000 KPIs across 40
– > 40 city departments enabled government that is departments
– 8 million people – Accessible – City government culture
– Transparent transformed to ensure greater
▪ Hard to measure city
– Accountable accountability for
performance
performance
– Limited data available to ▪ Launched NYC 311, a non-emergency
citizens central number now receiving >1.2 million ▪ Provides customers and advocacy
– Limited data-sharing and calls per month where citizens go to groups with a fast, flexible tool to
integration across report street repairs and illegally parked monitor city performance and
departments vehicles, request tax information, and service level

▪ Complex interface between

much more – > 500 "critical"
outcome

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citizens and city ▪ Launched Citywide measures
– Over 40 help-lines: Performance – Digestible
▫ 14 for public safety Reporting Online formats
▫ 8 for infrastructure, (leveraging 311 and ▪ NYC BigApps
regulatory and other agency data) competition inspires
community services
innovation of useful
▫ 7 for business affairs
apps for all aspects of
and waste management
city life
▫ 11 for health and
human services

SOURCE: Press search; web search; team analysis McKinsey & Company | 12
LEAD WELL – DEVELOP A PERSONAL VISION
Bogota – Antanas Mockus
▪ Turn the city of Bogota safer and cleaner and
inculcate a greater sense of civility and community

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Personal ▪ He believed in the power of social incentives and
vision norms and communicated his vision through
creative and playful campaigns aimed to spark
residents’ interest and increase the visibility and
social costs of undesirable behavior.

▪ Famous initiatives included hiring 420 mimes to

make fun of traffic violators, because he believed
Colombians were more afraid of being ridiculed
than fined.
– Traffic fatalities dropped by over 50%,
▪

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When he asked residents to pay a voluntary extra
Impact 10% in taxes, 63,000 people did so
▪ Bogotá saw improvements such as: water usage
dropped 40%, 7000 community security groups
were formed and the homicide rate fell 70%,
drinking water was provided to all homes (up from
79% in 1993), and sewerage was provided to 95%
of homes (up from 71%).

SOURCE: Press search; web search McKinsey & Company | 13

Agenda

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What great cities do?

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Imperatives for Indian cities

McKinsey & Company | 14

Cities are likely to house 40 percent of India’s population by 2030

Urban population

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Million

600+

+223
377
290
220

1991 2001 2011 2030

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Total population
856 1,040 1210 1,470
Million

Urbanisation rate1
26 28 31 41
Percent

1 Defined as the ratio of urban to total population based on the census definition of urban areas; population >5,000; density
>400 persons per square kilometre; 75 percent of male workers in non-agricultural sectors; and statutory urban areas.

SOURCE: India Urbanisation Econometric Model; McKinsey Global Institute analysis McKinsey & Company | 15
10 states will be more than 50% urbanised by 2030
2011
Urbanisation rate Urban population
Percent, total population Million 2030

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48 34.9
Tamil Nadu
62 52.7
48 15.9
Kerala
69 25.3
45 50.8
Maharashtra
60 79.9 Goa and
43 25.7 Mizoram
Gujarat are already
63 45.4
50%
39 23.6 urbanised
Karnataka

Printed
55 39.2
37 10.4
Punjab
54 19.0
35 8.8
Haryana
52 16.5
33 28.4
Andhra Pradesh
53 51.2

SOURCE: McKinsey Global Institute India Econometric Model; Census 2011 McKinsey & Company | 16
Opportunity in the top Indian cities of tomorrow will be much bigger than
countries today

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Top 3 cities will be the size of ... next 6 cities will become 2-4X ... next 5 cities will be equal
countries today ... the size of Mumbai today to Mumbai
GDP 2030, US$ Billion, 2008 prices GDP 2030, US$ Billion, 2008 prices GDP 2030, US$ Billion, 2008 prices

4 Bangalore 4x 134 10 Vadodara 42

1 Mumbai
260
(MMR)
5 Chennai 83
11 Nagpur 36

6 Ahmedabad 83
2 Delhi 250 12 Kochi 35
7 Pune 74

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13 Vishakha- 34
8 Hyderabad patnam
66

3 Kolkata 200 2x
14 Chandigarh 32
9 Surat 66

220 36 36
(Malaysia GDP, 2010) (GDP, Mumbai, 2010) (GDP, Mumbai, 2010)

SOURCE: McKinsey’s “Granularity of Growth” work McKinsey & Company | 17

The situation on the ground in our cities is grim
Water supply Sewage Affordable housing Public transportation

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24% of urban
Only 105 lpcd Only 30% of sewage is Public transport share
population lives in
supplied, need 140-150 treated has declined to ~30%
slums

Storm water drains Private transportation Solid waste Open space

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Peak morning travel Only 70% of solid Only 2.7 m2 open space
Storm water drain
time of 1.5-2 hours in waste is collected per capita compared to
coverage of only 20%
large cities today 14 m2 in Beijing

SOURCE: McKinsey Global Institute analysis McKinsey & Company | 18

Current trajectory will result in urban decay and gridlock

Water supply quantity

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Liters per capita per day
Current Future
220
150
105
65

Vehicular congestion
Peak vehicles per lane kilometer
610

170 112 85

Printed
Slum population
Million households
38
25

0 0

Current Basic Best-in- 2030

Class Business
as usual

SOURCE: United Nations; Handbook of benchmarks, Ministry of Urban Development; W. Smith, Transportation Policies and
McKinsey & Company | 19
Strategies in Urban India; National Council for Applied Economic Research; McKinsey Global Institute analysis
India’s urban operating model should focus on three key elements

Elements of operating model

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City Development Funding
Planning and Policies
Where will resources
How do cities plan and come from?
incentivize/enforce their
planning choices? 1 2

Printed
3
Reforms & Governance
What needs to change to
empower our cities and
make them accountable?

SOURCE: McKinsey Global Institute analysis McKinsey & Company | 20

India’s urban operating model should focus on three key elements

Elements of operating model

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City Development
Planning and Policies Funding
How do cities plan and Where will resources
incentivize/enforce their come from?
planning choices? 1 2

Printed
3 Reforms & Governance
What needs to change to
empower our cities and make
them accountable?

SOURCE: McKinsey Global Institute analysis McKinsey & Company | 21

In every international best practice city we studied, there were uniform
“nuts and bolts” lessons

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City ▪ All have evolved urban planning systems with systematic attention to
Development job creation, affordable housing and public transportation
Planning and ▪ Best practice cities followed the principle “Economic
Policies master-planning before physical master-planning”

▪ All countries spent more than $300 in capita in capital expenditure

on their large cities annually
▪ Cities in developing countries used land monetization to fund urban
Funding
infrastructure
▪ All cities have systematic, formula based funding from central and
state governments, and leverage debt well

Printed
▪ All cities have strong, empowered, elected political leaders
▪ All large cities had metropolitan structures (and not just municipal)
Reforms &
for governance
Governance
▪ Most cities have moved towards agency structure for service
delivery, with chief executives and MOUs with cities

McKinsey & Company | 22

Key principle of planning

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Economic master-planning before
physical master-planning

Infrastructure Land
Job creation
tailored towards monetisation

Printed
engines with
the job creation and financing
anchor tenants
engines strategies

SOURCE: Source McKinsey & Company | 23

 PLANNING
Granular FAR planning norms in New York instead of one-value-for-all

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Ward-wise specification
of maximum FAR and
minimum open space
ratios

Printed
1 Footnote

Source: MMR Regional Plan 1996-2011; The London Plan McKinsey & Company | 24
London master plan includes detailed peak transport planning PLANNING

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Population and Sequencing of key
Peak AM traffic
employment forecasts transportation Financing strategies
demand by region
by region projects

Printed
SOURCE: The London Plan, Transport for London (TfL) McKinsey & Company | 25
India should consider a cascaded urban planning system PLANNING
with integrated content
Plan content

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Metropolitan
Concept plan ▪ 40-year forecasts, Economic development strategy,
Planning High-level land use, Major transit projects
Committee

Metropolitan
Master plan ▪ 20-year forecasts, Economic development strategy,
Authority Broad ward-level land-use plan and FSI including,
Technical
Key projects and policies in Metropolitan
Planning
transportation and affordable housing
Board
Planning Parameters that cascade
Department down to municipalities
▪ Target population and employment for wards
▪ Ward-level broad land use and FAR, including
areas for intensification, regeneration, and

Printed
greenfield development
▪ Major transportation projects and their effects on
ward-level land use and densities
Development
▪ Goals for specific sectors such as affordable
Municipality housing, including zoning norms
plan
Technical
Planning ▪ 20-year detailed plot-level land-use plan, Key
Board projects and policies in local transportation, water,
Planning sewage, solid waste, stormwater drains, urban
Department design norms

SOURCE: McKinsey Global Institute analysis McKinsey & Company | 26

Smart Components that can be integrated in city planning PLANNING

City pain points addressed

Environ-

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Reliability Health Time Safety
ment

Smart city solutions

Better energy management Better transportation services

1 Smart meters & demand 11 Congestion zone & lanes
management
12 Smart parking meters & pricing
2 Distribution & substation
automation 13 Adaptive traffic control
3 Building energy management (real time signal optimization)
4 Streetlight, building and 14 Fleet monitoring, maintenance,
structural health monitoring and location services

Better water management 15 Integrated intermodal fare

5 Smart meters & demand payment

Printed
management
6 Leak identification and E-governance and citizen services
preventive maintenance
7 Water quality monitoring 16 Citizen information and complaint management

8 Stormwater response 17 Video crime monitoring

Better air management 18 Citizen sourcing (empowering citizens to be

the city’s eyes and ears)
9 Air-quality monitoring

Better waste management

10 Smart solid waste management

1 Solutions included are described in greater detail in the following; solutions must exist in at least one city to have been McKinsey & Company | 27
included
India’s urban operating model should focus on three key elements

Elements of operating model

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City Development
Planning and Policies Funding
How do cities plan and Where will resources
incentivize/enforce their come from?
planning choices? 1 2

Printed
3 Reforms & Governance
What needs to change to
empower our cities and make
them accountable?

SOURCE: McKinsey Global Institute analysis McKinsey & Company | 28

India has massively underinvested in its cities in comparison with FUNDING

other urban centres around the world

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India’s current USD per capita urban Comparison of India’s USD per capita urban
spending1 across tiers spending with other countries

391

116 127

Printed
58
14 17
1
Tier-1 Tier-2 Tier-3/4 Total China South United
Urban India Africa Kingdom

1 Urban services include water, sewage, city roads, storm-water drains, mass transit (including rail-based mass-transit), solid waste, and
low-income housing

SOURCE: Press search; McKinsey Global Institute analysis McKinsey & Company | 29
Indian cities need capital funding of USD 1.2 trillion over 20 years FUNDING

USD per capita per annum

Funding requirement for urban sectors, 2010-2030

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USD billion, 2008 prices
Capital expenditure
1,182
134

395

392

Printed
231
17
96 68

Current Required Water Sewage City Mass Afford- Total

and roads transit able capex
sanitation housing1

1 Net of beneficiary contribution

SOURCE: India urbanisation funding model; detailed project reports from the Jawaharlal Nehru National Urban Renewal
McKinsey & Company | 30
Mission (JNNURM); McKinsey Global Institute analysis
Cities across the world have used four key funding sources FUNDING

$ per capita 350

Land

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Monetization per annum 139

Shanghai Hong Kong

$ per capita 811

Property tax and 541
user charges per annum

London Shanghai

$ per capita 659

Debt and PPP per annum 120

Printed
London Shanghai

Per cent of 70%

Support from
local budget 32% 30%
government

London New York Shanghai

1 DRK – Directional Route Kilometres

SOURCE: India Urbanization Transportation Model; McKinsey Global Institute analysis McKinsey & Company | 31
India too needs to leverage these four to satisfy funding urban funding
requirements
$ per capita per annum, 2008 prices

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CapEx OpEx
134 112 116
127

43

76
26
58
36

Printed
Mon- Debt Formula Total CapEx Property User Total OpEx
etizing and based CapEx required tax chargrs OpEx required
land PPP government
grant

Note: Numbers may not sum due to rounding

SOURCE: India Urbanization Funding Model; McKinsey Global Institute analysis McKinsey & Company | 32
 FUNDING
Successful examples of such funding already exist in India

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MMRDA capital spend program
USD billion, 2010-2015

22

11

Printed
7

Land Debt and Total Govt. Total

Monetization PPP Support Spend
2010-2015

SOURCE: MMRDA; Press search; McKinsey Global Institute analysis McKinsey & Company | 33
Municipal Corporation of Greater Mumbai (MCGM) has only recently FUNDING
introduced policies to generate funds through land monetization

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Background and highlights
▪ FAR of 1 is free of charge for every non-agricultural land parcel. Largely,
additional FSI is allotted on a discretionary basis rather than on the carrying
capacity of the region determined by city’s master plan

▪ As per fungible FSI policy introduced by MCGM, developers have to pay a

premium for additional FAR in areas under the jurisdiction of the corporation
– Residential construction: for an additional 35% of FAR, developers need to
pay a premium of 60% of the per square foot ready reckoner price

Printed
– Commercial and industrial development: for an additional 20% of FAR,
developers need to pay a premium of 80% to 100% of the per square foot
ready reckoner price

Generate US$ 250 to 300 million annually,

leveraged to create US$ 1billion of funds annually

McKinsey & Company | 34

India’s urban operating model should focus on three key elements

Elements of operating model

Last Modified 30/01/2015 00:27 India Standard Time

City Development
Planning and Policies Funding
How do cities plan and Where will resources
incentivize/enforce their come from?
planning choices? 1 2

Printed
3 Reforms & Governance
What needs to change to
empower our cities and make
them accountable?

SOURCE: McKinsey Global Institute analysis McKinsey & Company | 35

Create accountable corporatised agencies GOVERNANCE

(instead of departments) in our largest cities

Examples of success, including in India

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▪ Transport for London
– Increased share of public
London transportation

▪ Johannesburg Water
– Revenue collection has Allows for
Johannes- increased from 56% to 105% fast decision
burg making and
efficient

Printed
service
delivery
▪ BEST in Mumbai
– Well functioning
India – Fast decision making

McKinsey & Company | 36

Base reform agenda for small ULBs (population less than REFORMS &
GOVERNANCE
5 lakhs as per census 2011)
Proposed reforms

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1▪ Adoption of double entry system of accounting
2▪ Introduction and enhancement of e-governance system with modules on property tax,
accounting, water charge payment and birth & death should be implemented
3▪ Collection of property tax, with overall efficiency of 65% in 5 years. ULBs may outsource
the property listing, calculation of property tax and billing of the tax
4▪ User charge collection
– ULBs should collect user charges at least up to 80% of O&M cost in 5 years
– ULBs in NE and Hilly states should collect user charges up to 50% of the O&M cost
in 5 years

Printed
– States should approach the electricity tariff regulator to allow electricity to be charged
at domestic rates (instead of commercial rates) for supplying water

5▪ Put in place transparent FAR policies and market value based FAR charges
6▪ Earmarking at least 10-15% land or 20-25% dwelling units for housing projects for
EWS/LIG category with a system of cross subsidization
7▪ Internal earmarking within local body budgets for basic service to the urban poor

McKinsey & Company | 37

Base reform agenda for large ULBs (population more than REFORMS &
GOVERNANCE
5 lakhs as per census 2011)

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Proposed reforms
1▪ Adoption of accrual based double entry system of accounting
2▪ Introduce and enhance e-governance system with modules on property tax, accounting, water charge
payment, birth & death, citizen grievances, building plan approval, e-procurement and hawker’s licenses
should be implemented
3▪ Prepare a 20 year integrated spatial development plan extending ~10-15 km beyond the municipal limits
4▪ Collection of property tax, with overall efficiency of 75% in 5 years:
– GIS mapping should be used to increase coverage efficiency
– ULBs may outsource the property listing, calculation of property tax & billing of the tax
5▪ User charge collection
– ULBs should collect user charges at least up to 100% of O&M cost in 5 years
– ULBs in NE and Hilly states should collect user charges up to 50% of the O&M cost in 5 years
– States should approach the electricity tariff regulator to allow electricity to be charged at domestic rates

Printed
(instead of commercial rates) for supplying drinking water
6▪ Create a ring-fenced development fund, financed through sources such as all proceeds from land
monetization, betterment charges, FAR charges (in line with the integrated spatial development plan), Land
use conversion charges, Development charges etc
7▪ Put in place transparent FAR policies and market value based FAR charges
8▪ Earmarking at least 10-15% land or 20-25% dwelling units for housing projects for EWS/LIG category with a
system of cross subsidization
9▪ Internal earmarking within local body budgets for basic service to the urban poor

McKinsey & Company | 38

Base reform agenda for metropolitan areas (UAs with REFORMS &
GOVERNANCE
population more than 1 million)
Proposed reforms

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1▪ All metropolitan areas (UAs) with population over 1 million should institute the
Metropolitan Planning Committee (MPC) with the development authority/ any other such
agency as the secretariat. The MPC should prepare a 20 year metropolitan level
Integrated Spatial Development Plan (ISDP). This plan should be legitimised through a
statutory provision in the state town and country planning act and made binding on
municipal plans. The plan should include:
– Strategic densification
– City mobility plan
– Economic and commercial activity plan
– Infrastructure plan

Printed
– Disaster management plan
– Inclusionary zoning with affordable housing plan, and
– Environment conservation plan

2▪ All metropolitan areas (UAs) with population above 4 million, should set up an UMTA to
facilitate integration of multi-modal transport systems and ensure it works with the MPC
and has the MDA as the secretariat

McKinsey & Company | 39

Base reforms for all states REFORMS &
GOVERNANCE

1▪ Strengthen the State Finance Commissions and act on the existing recommendations of

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previous SFCs
2▪ Create and establish the Municipal Cadre
3▪ Set up a State Property Tax Board to frame assessment guidelines (based on either a capital
value or annual rental system that is indexed every 3-5 years to factor in real estate
appreciation) for property tax collection
4▪ Prepare a State level urban blueprint to manage the urban population
5▪ Repeal of Urban land Ceiling and Regulation act
6▪ Revise town planning act, DCRs, municipal laws, and building bye-laws with a view to:
– Allow mixed use of land to enable levy of FAR charges
– Vest the authority Local Area development authorities to plan for local areas just outside

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municipal boundaries (15 km for 5 lakh+ ULBs)
– Put in place a time bound process for building plan approvals
– To levy rationale basement controls, façade controls and maintenance
7▪ Amendment of Rent Control Laws balancing the interest of landlords and tenants
8▪ Rationalization of Stamp Duty to bring it down to 5% or lower
9▪ Introduction of computerized process of registration of land and property
10▪ Provide security of tenure at affordable prices to urban poor

McKinsey & Company | 40

India’s urban operating model should focus on three key elements

Elements of operating model

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City Development Funding
Planning and Policies
Where will resources
How do cities plan and come from?
incentivize/enforce their
planning choices? 1 2

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3
Reforms & Governance
What needs to change to
empower our cities and
make them accountable?

SOURCE: McKinsey Global Institute analysis McKinsey & Company | 41

Last Modified 30/01/2015 00:27 India Standard Time Printed
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McKinsey & Company
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