Indien_Handelsblatt_08JUN2017by Mathias Peer

India´s population is growing rapidly. Brand new “smart” cities are seen as a way of relieving the pressure on infrastructure. Building new urban space for living and working is one of the key issues to be addressed for the future of the country. German investors, too, are hoping for good business.

Bangkok. From the roof-top garden, visitors to the shopping mall in the state of Andhra Pradesh, eastern India, look down on a bustling city. A high-speed train pulls out of the station, a palm-fringed river promenade is reflected in the glass facades of the office high-rises. Traffic flows freely over the asphalt in the midday heat, no snarl-ups in sight. This modern, clean high-tech metropolis exists so far only as a 3D animation. But if it is up to Nara Chandrababu Naidu, then within a few years this vision will become a reality.

The Chief Minister of Andhra Pradesh has great ambitions for a new capital for his state. On the banks of the river Krishna, where currently farmers grow vegetables, he plans to build a brand new city called Amaravati. Today around 14,000 people live in this spot. After completion that figure could be as many as twelve million. Amaravati aims to be India´s flagship urban development project. “This city will be a metropolis of world class,” promises Naidu. “It will be even more attractive than Singapore.”

Interest in this pioneering venture is high from far beyond the borders of Andhra Pradesh. Building new urban space on the subcontinent is seen as a priority for the future. India´s population has already reached 1.3 billion people, and each month it grows by another million or more. The majority of Indians still live in rural areas. Yet every year over ten million of them move into the cities. The result is a shortage of housing, an overloaded infrastructure, endless traffic jams. “Smart cities” are one way the government of Prime Minister Narendra Modi is aiming to cope with this flow. Existing cities are to be equipped with intelligent sensor technology and brand new cities are to be built on greenfield sites. European companies, too, are hoping to win business from this initiative.

International interest

Two programs have been launched in response to this ambition: “Smart Cities Mission” aims to create 100 new cities; and “Amrut” aspires to upgrade 500 existing cities with new, smart technology. Each program is set to be funded to the tune of $7.5 billion dollars. That, however, will fall short of requirements by a long way. Consultants Deloitte are expecting investment to rise from $2 billion in 2016 to $58 billion in 2020. The majority of this will come from private investors.

Siemens has already expressed interest in getting involved in the smart city projects. “The smart cities initiative is a considerable growth opportunity for Siemens in India,” said a Group spokesperson following Modi´s presentation of the project. Group CEO Joe Kaeser himself went to India to promote the full-service solutions offered by his company.

The Indian construction company Larsen & Toubro is one competitor. In January this company won the contract to fit smart, integrated technology in the industrial city of Pune, and it is planning a smart city control center which uses environmental sensors and video analysis to monitor the city. A similar project has been entrusted to the French company Schneider Electric in Naya Raipur. This electronics firm will be supplying an integrated solution for real-time traffic, energy and water management.

Smart, integrated systems

Chief Minister Naidu is also hoping to attract support from leading companies for the Amaravati project. In cooperation with Japanese partners, a system of sensors and cameras is to be installed to monitor traffic movement around the clock. Special software collects data on traffic flows and automatically adjusts the timing of traffic signals, redirecting when necessary. The aim is to eliminate congestion entirely. Also planned is a smart electricity grid that can predict energy demand and compensate for any shortfalls in supply. This would then remove the risk of the kind of electricity outages commonly experienced in the rest of India. Naidu also wants his new capital to be attractively designed, and to this end he has engaged British architects Foster + Partners, who also planned the dome on the German Reichstag building. In total, the project to build this visionary metropolis is set to cost around €14 billion in the coming decade and a half.

Despite the promises, Naidu´s vision has not been welcomed by some citizens. At the end of April angry farmers protested in Amaravati. Worried about losing their land, they dumped part of their harvest in the streets and blocked the traffic. And the Chief Minister does indeed want a lot of land for his new project: the new state capital is to cover 217 square kilometers, which is about the size of Frankfurt am Main. The government is offering the farmers an exchange scheme: Those who give up their land will later receive plots in the city which – the promise is – will turn out to be much more valuable than the agricultural land they hold today. Nevertheless protests and court cases have delayed the start of construction. In May Naidu laid the foundation stone for the central part of the new city – one year later than planned.

High-tech is also coming to the west of India, in this case to a village called Dholera, which at present has barely 3,000 inhabitants. This is one of eight planned new cities that Indian authorities are working on as part of the Delhi-Mumbai Industrial Corridor plan. Equipped with sensors that monitor the infrastructure 24/7, Dholera will be a model project in India´s smart cities initiative. Located in Modi´s home state of Gujurat, the new Dholera will ultimately extend to over 900 square kilometers, which would make it bigger than Mumbai. Because many of the locals do not want to give up their land, this project, which started in 2009, is progressing only slowly. “Land acquisition is one of the biggest challenges for the construction of new cities in India,” says Saurabh Mehrotra, consultant at the real estate firm Knight Frank. “Again and again there are disputes over compensation payments, and that leads to delays. In the end, however, it will always be possible to resolve such conflicts.”

Brand new cities, planned from scratch on the drawing board, can, however, fail. Architects and urban planners are experiencing just that in Naya Raipurt, the capital of the state of Chhattisgarh. The authorities there concentrated on setting up an administrative center for the government, which moved into these premises in 2012. Five years on, virtually the only people you see on the streets are government employees. And after office hours the city is practically deserted. Even the officials prefer to commute from the neighboring city where there is more on offer socially and culturally.

Unimagined opportunities

Nevertheless, Mehrotra from Knight Frank thinks the smart city plans have good prospects. India has learned from the failures of the past. “The planners know that it is not enough to just set up a few government buildings. A living city needs shopping centers, entertainment, but above all jobs for the inhabitants.”

And it is there that the German real estate investor Lorenz Reibling sees an opportunity. The founding partner of the investment company Taurus is planning a shopping mall and a hotel complex in the southern Indian state of Kerala. Today there is a business park which the local government would like to expand into a satellite city – under the name of Technocity – for the state´s capital. Reibling, who wants to develop a site in the center of the park for an overall investment of up to €200 million, senses a gap in the market: “There is no shopping mall there as yet,” he says. “Currently over 60,000 young people have no place to go and shop, there are no restaurants and no cinema.” The planned expansion of the city is intended to increase the potential customer base. Construction is expected to start this year. And already Taurus has leased around half of the available retail space.

Reibling is positive about further developments in India. He sees the cities of the subcontinent as one of the world´s most promising markets and opportunities “without any cut-throat competition”. In particular he regards second-tier cities as highly attractive. The reason is given by Ajay Prasad who is responsible for Taurus´ business in India: In planned cities such as Amaravati, competition is simply much less than in Mumbai or Delhi.

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