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The Constitution of India has assigned the subjects pertaining to the urban areas to the State Legislatures. In so far as the urban issues are concerned, the legislative powers of the Union are limited only to the following subject/ areas:

- Delhi and other Union Territories
- Property of the Union
- A subject of the state list which two or more state legislatures authorise Union Parliament to legislate.
- Amendment of the Constitution of India.

In exercise of these legislative powers, the Parliament of India has enacted legislations which are administrated by the Ministry of Urban Development & Poverty Alleviation.

Housing and Urban Policy in India

The policies of urban development and housing in India have come a long way since 1950s. The pressure of urban population and lack of housing and basic services were very much evident in the early 1950s. In some cities this was compounded by migration of people. However, the general perception of the policy makers was that India is pre-dominantly an agricultural and rural economy and that there are potent dangers of over urbanisation which will lead to the drain of resources from the countryside to feed the cities. The positive aspects of cities as engines of economic growth in the context of national economic policies were not much appreciated and, therefore, the problems of urban areas were treated more as welfare problems and sectors of residual investment rather than as issues of national economic importance.

In the First Five Year Plan (1951-56), the emphasis was given on institution building and on construction of houses for Government employees and weaker sections. The Ministry of Works & Housing was constituted and National Building Organisation and Town & Country Planning Organisation were set up. A sizeable part of the plan outlay was spent for rehabilitation of the refugees from Pakistan and on building the new city of Chandigarh. An Industrial Housing Scheme was also initiated. The Central Government subsidised Scheme to the extent of 50% towards the cost of land and construction.

The scope of housing programme for the poor was expanded in the Second Plan (1956-61). The Industrial Housing Scheme was widened to cover all workers. Three new schemes were introduced, namely, Rural Housing, Slum Clearance and Sweepers Housing. Town & Country Planning Legislations were enacted in many States and necessary organisations were also set up for preparation of Master Plans for important towns.

The general directions for housing programmes in the Third Plan (1961-66) were co-ordination of efforts of all agencies and orienting the programmes to the needs of the Low Income Groups. A Scheme was introduced in 1959 to give loans to State Governments for a period of 10 years for acquisition and development of land in order to make available building sites in sufficient numbers. Master Plans for major cities were prepared and the State capitals of Gandhi Nagar and Bhubaneswar were developed.

The balanced urban growth was accorded high priority in the Fourth Plan (1969-74). The Plan stressed the need to prevent further growth of population in large cities and need for decongestion or dispersal of population. This was envisaged to be achieved by creation of smaller towns and by planning the spatial location of economic activity. Housing & Urban Development Corporation (HUDCO) was established to fund the remunerative housing and urban development programmes, promising a quick turnover. A Scheme for Environmental Improvement or Urban Slums was undertaken in the Central Sector from 1972-73 with a view to provide a minimum level of services, like, water supply, sewerage, drainage, street pavements in 11 cities with a population of 8 lakhs and above. The scheme was later extended to 9 more cities.

The Fifth Plan (1974-79) reiterated the policies of the preceding Plans to promote smaller towns in new urban centres, in order to ease the increasing pressure on urbanisation. This was to be supplemented by efforts to augment civic services in urban areas with particular emphasis on a comprehensive and regional approach to problems in metropolitan cities. A Task Force was set up for development of small and medium towns. The Urban Land (Ceiling & Regulation) Act was enacted to prevent concentration of land holding in urban areas and to make available urban land for construction of houses for the middle and low income groups.

The thrust of the planning in the Sixth Plan (1980-85) was on integrated provision of services along with shelter, particularly for the poor. The Integrated Development of Small and Medium Towns (IDSMT) was launched in towns with population below one lakh for provision of roads, pavements, minor civic works, bus stands, markets, shopping complex etc. Positive inducements were proposed for setting up new industries and commercial and professional establishments in small, medium and intermediate towns.

The Seventh Plan (1985-90) stressed on the need to entrust major responsibility of housing construction on the private sector. A three-fold role was assigned to the public sector, namely, mobilisation for resources for housing, provision for subsidised housing for the poor and acquisition and development of land. The National Housing Bank was set up to expand the base of housing finance. NBO was reconstituted and a new organisation called Building Material Technology Promotion Council (BMTPC) was set up for promoting commercial production of innovative building materials. A network of Building Centres was also set up during this Plan period. The Seventh Plan explicitly recognised the problems of the urban poor and for the first time an Urban Poverty Alleviation Scheme known as Urban Basic Services for the Poor (UBSP) was launched.

As a follow-up of the Global Shelter Strategy (GSS), National Housing Policy (NHP) was announced in 1988. The long term goal of the NHP was to eradicate houselessness, improve the housing conditions of the inadequately housed and provide a minimum level of basic services and amenities to all. The role of Government was conceived, as a provider for the poorest and vulnerable sections and as a facilitator for other income groups and private sector by the removal of constraints and the increased supply of land and services.

The National Commission of Urbanisation submitted its report. The Report eloquently pointed out the reality of continuing and rapid growth of the urban population as well as the scale and intensity of urbanisation, the critical deficiencies in the various items of infrastructure, the concentration of vast number of poor and deprived people, the acute disparities in the access of shelter and basic services, deteriorating environmental quality and the impact of poor governance on the income and the productivity of enterprises.

In the backdrop of this report the Eighth Plan (1992-97) for the first time explicitly recognised the role and importance of urban sector for the national economy. While growth rate of employment in the urban areas averaged around 3.8% per annum, it dropped to about 1.6% in the rural areas. Therefore, the urban areas have to be enabled to absorb larger increments to the labour force.

The Plan identified the key issues in the emerging urban scenario:

• the widening gap between demand and supply of infrastructural services badly hitting the poor, whose access to the basic services like drinking water, sanitation, education and basic health services is shrinking
• unabated growth of urban population aggravating the accumulated backlog of housing shortages, resulting in proliferation of slums and squatter settlement and decay of city environment
• high incidence of marginal employment and urban poverty as reflected in NSS 43rd round that 41.8 million urban people lived below the poverty line.

The response of the Plan to this scenario was the launching of Urban Poverty and Alleviation Programme of Nehru Rojgar Yojana (NRY)

Plan Outlay in Housing and Urban Development Sector

Rs. in million

Plan Total Outlay Housing & Urban Development Percentage share in the total

First Plan




Second Plan




Third Plan




Annual Plan (1966-69)




Fourth Plan




Fifth Plan




Annual Plan (1977-80)




Sixth Plan




Seventh Plan




Annual Plan (1990-92)




Eighth Plan




Ninth Plan




Tenth Plan




The Urban Land (Ceiling & Regulation) Act, 1976

The Urban Land (Ceiling and Regulation ) Act, 1976 came into force on 17.02.1976. The States of Andhra Pradesh, Haryana, Gujarat, Himachal Pradesh, Karnataka, Maharashtra, Orissa, Punjab, Tripura, Uttar Pradesh and West Bengal initially adopted the Act. Subsequently it was adopted by six more states namely Assam (25.03.76), Bihar (01.04.1976), Madhya Pradesh (09.09.76), Manipur (12.03.76), Meghalaya (07.04.76) and Rajasthan (09.03.76). The Act was being implemented in the urban agglomeration having population of more than two lakhs as per the 1971 Census (64 urban agglomerations).

The Urban Land (Ceiling and Regulation) Act, 1976 was replaced by an Ordinance promulgated on 11.01.1999 after the State Governments of Haryana and Punjab passed a resolution for repeal of the Act. The Ordinance was replaced by Urban Land (Ceiling & Regulation) Repeal Act, 1999 0n 22.03.99. Initially the repeal Act was applicable in Haryana, Punjab and all the Union Territories. Subsequently, the Repeal Act has been adopted by the State Governments of Uttar Pradesh, Gujarat, Karnataka, Madhya Pradesh Rajasthan and Orissa. The State Government of Andhra Pradesh, Assam, Bihar, Maharashtra and West Bengal have not adopted the Urban Land (C & R) Repeal Act, 1999 so far.

The Urban Land (Ceiling & Regulation) Repeal Act, 1999

The Urban Land(Ceiling & Regulation) Act 1976 has been repealed by the Urban Land (Ceiling and Regulation) Repeal Act, 1999. The Repeal Act has been notified on 23.3.99. It shall come force in the Union Territories and the States of Punjab and Haryana where the State Legislatures have already approved the repeal.

Urban Growth

Contrary to popular concepts of a predominantly rural India, an increasingly larger percentage of Indian population lives in the Urban areas. Today, India's urban population is second largest in the world after China, and is higher than the total urban population of all countries put together barring China, USA and Russia. Over the last fifty years, while the country's population has grown by 2.5 times, in the urban areas it has grown by five times. It is estimated that by the turn of the millennium 305 million Indians shall be living in nearly 3,700 towns and cities spread across the length and breadth of the country. This would be nearly 30 per cent of country's total population.

According to the 1991 census, 3.7 per cent of Indian population lived in the mega cities Mumbai (Bombay), Delhi, Calcutta and Chennai (Madras). In 1947, only 60 million people (15 per cent of the total population at that time) lived in urban areas. The steep growth in number of people living is partly due to the skewed development that has led to proliferation of commercial activities and great job opportunities in towns and cities. Facilities like health and Education and infrastructure like roadways, telecommunication, airports, railways and ports are also many times better in urban areas. The degree to which development is skewed in India can be assessed from the fact that 40 per cent of all overseas phone calls are to or from Mumbai.   

Urban India Population 1901-1991

                    Population   Percentage of Urban       Decade growth 
                    (million)       to total Population           rate (per cent)

1901              29.9              10.8                              -
1911              25.9              10.3                             0.4
1921              28.1              11.2                            18.3
1931              33.5              12.0                            19.1
1941              44.2              13.9                            32.0
1951              62.4              17.3                            41.4
1961              78.9              18.0                            26.4
1971             109.1             19.9                            38.2
1981             159.5             23.3                            46.1
1991             217.6             25.7                            36.4
2001             306.9             30.5                            41.0

Levels of Urbanization

Urbanization is a broad term and there are wide variations amongst the States and regions in the level of urbanisation. National Capital Territory of Delhi with 92.73 per cent urbanization and the Union territory of Chandigarh with 93.63 per cent urbanization are the most urbanized cities while Dadra and Nagar Haveli at 8.47 per cent urbainization is the least urbanized city in the country. The states with greater urban concentration are  Maharashtra with 38.73 per cent of its population living in urban areas, followed by Gujarat (34.40 per cent) and Tamil Nadu (34.20 per cent).

While there has been urban growth in some states, in other states and cities there has also been deceleration. Inter-state variation in the annual growth of urban population and urban-rural growth differential (URGD) throws more light on the development of urban India and its underlying characteristics. Except in Kerala, Gujarat and Maharashtra, the URGD is lower in all other states during 1981-91 than in 1971-81. Conspicuous deceleration in urban growth during 1981-91 has taken place in Bihar, Orissa and Uttar Pradesh.

Urban Morphology

According to the 1991 census, two-third of the country's urban population lived in Class-I cities with more than 1,00,000 population.

Size of    PopulationRange    No. of Towns     Share of   
Towns                                                            Urban Population
I             1,00,000 & above          300                  65.20%
II             50,000 to 99,999          345                  10.95%
III            20,000 to 49,999          947                  13.19%
IV           10,000 to 19,999        1,167                   7.77%
V             5,000 to 9,999             740                   2.60%
VI            less than 5,000            197                   0.29%
All Classes                              3,696                100.00%

It is interesting to note that the population growth is more in cities that are big. About one-third of Urban India (71 million) lives in metropolitan cities (million plus). The number of such cities in India has increased from 1 in 1901 to 5 in 1951 to 23 in 1991. It is estimated that the number will go up to 40 by 2001. Out of the total increase in the country's urban population of 58 million between 1981 and 1991, 44 million were added to Class I cities alone. 28 million persons were added in metropolitan cities.

Million-plus cities of India

Rank    City                                              Population (in million) 
                                               1951             1971             1991
1.    Bombay (Mumbai)              2.97              5.97            12.57
2.    Calcutta                            4.67              7.42            10.92
3.    Delhi                                 1.44              3.65              8.38
4.    Madras (Chennai)               1.54              3.17              5.36
5.    Hyderabad                         1.13              1.80              4.28
6.    Bangalore                          0.79              1.66              4.09
7.    Ahmedabad                       0.88              1.75              3.30
8.    Pune                                 0.61              1.14              2.49
9.    Kanpur                              0.71              1.28              2.11
10.  Nagpur                              0.48              0.93              1.66
11.  Lucknow                            0.50              0.81              1.64
12.  Surat                                 0.24              0.49              1.52
13.  Jaipur                                0.30              0.64              1.52
14.  Kochi                                0.18              0.51              1.14
15.  Coimbatore                        0.29              0.74              1.14
16.   Vadodara                          0.21              0.47              1.12
17.  Indore                                0.31              0.56              1.10
18.  Patna                                0.32              0.55              1.10
19.  Madurai                             0.37              0.71              1.09
20.  Bhopal                               0.10              0.38              1.06
21.  Vishakapatnam                  0.11               0.36              1.05
22.  Varanasi                            0.37               0.64              1.03
23.  Ludhiana                            0.15               0.40              1.01

The four mega cities, namely Mumbai, Calcutta, Delhi and Chennai, with a population of more than 5 million each in 1991, account for almost one-fourth of the population living in Class-I cities. 

Role of Urban India in Indian economy

Most of the commercial activity perhaps other than agriculture and village merchandise takes place in Urban areas. Therefore, to a large extent, urban India is the engine of productivity and growth in the country. This is manifest in the increasing contribution of urban sector to national income.

Year    Percentage of Urban           Estimated contribution   
           to total population               to national income  
1951             17.3                                         29
1981             23.3                                         47
1991             25.7                                         55
2001             30.5                                         60

Growth of employment (main workers) in urban India during 1981-91 was recorded at 38% against 16% in rural areas and 26.1% in the country as a whole.

The Infrastructure Problem 

In spite of its prominent role in Indian economy, urban India faces serious problems due to population pressure, deterioration in the physical environment and quality of life. According to estimates nearly one third of the urban India lives below poverty line. About 15 percent of the urbanites do not have access to safe drinking water and about 50 percent are not covered by sanitary facilities.

Traffic congestion has assumed critical dimensions in many metropolitan cities due to massive increase in the number of personal vehicles, inadequate road space and lack of public transport. There is a huge and widening gap between demand and supply of essential services and infrastructure. Urban poor in India are forced to live under unhygienic conditions in slums, lacking in basic amenities. Slums have grown in almost all major cities due to inability of major chunks of population to afford accomodation in planned areas  of the cities.

Urban Reforms

Private sector investment for provisions of urban infrastructure can not take place unless a proper legal and regulatory framework for such investment is created and developed which ensures a full cost plus recovery of such investment. This calls for innovative reforms in municipal tax structure and user charges, taking into account poor paying capacity of a sizeable section of urban population. Various modes of Private-Public-Partnership (PPP) are being experimented by different urban local bodies in the country. Municipal Bond, Tradable Development Rights, Urban Shelter and Infrastructure Fund, use of Land as a Resource are some of the new techniques that are being applied by the city authorities.

The Constitution (74th) Amendment Act 1992 has unleashed a new era of dynamism and reform in Urban India.

Constitution (Seventy-Fourth Amendment) Act 1992

This is a revolutionary piece of legislation by which Constitution of India was amended to incorporate a separate Chapter on urban local bodies, which seeks to redefine their role, power, function and finances. The salient features of this Act are:

• Urban local bodies, to be known as Municipal Corporations, Municipal Councils and Nagar Panchayat depending on the population, shall be constituted through universal adult franchise in each notified urban area of the country.
• These shall be constituted for a period of five years and if dissolved earlier, an election to reconstitute it shall be completed before the expiration of a period of six months from the date of its dissolution.
• Not less than one-third of total number of seats in each urban local body shall be reserved for women.
• The Legislature of a State may by law entrust on these bodies such power and authority as may be necessary to enable them to function as institution of local self government, including those listed in the Twelfth Schedule.
• The Twelfth Schedule of the Constitution has listed the following functions of the urban local bodies:

• Urban Planning including town planning.
• Regulation of land-use and construction of buildings.
• Planning for economic and social development.
• Roads and bridges.
• Water supply for domestic, industrial and commercial purposes.
• Public health, sanitation, conservancy and solid waste management.
• Fire services.
• Urban forestry, protection of the environment and promotion of ecological aspects.
• Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
• Slum improvement and upgradation.
• Urban poverty alleviation.
• Provision of Urban amenities and facilities such as parks, gardens, playgrounds.
• Promotion of cultural, educational and aesthetic aspects.
• Burials and burial grounds; cremations, cremation grounds and electric crematoriums.
• Cattle pounds; prevention of cruelty to animals.
• Vital statistics including registration of births and deaths.
• Public amenities including street lighting, parking lots, bus stops and public conveniences.
• Regulation of slaughter houses and tanneries.

• In order that the urban local bodies can perform the functions assigned to them, the Legislature of a State shall assign them specific taxes, duties, tolls and levies and anthorise them to impose, collect and appropriate the same.
• Each State shall also constitute a Finance Commission which shall review the financial position of the urban local bodies and recommend the principles which should govern the devolution of resources, including grant-in-aid from the Consolidated Fund of the State of these bodies.
• The superintendence, direction and control of the preparation of electoral rolls for, and the conduct of, all elections to the urban local bodies shall vest in the State Election Commission.
• In each district a District Planning Committee shall be constituted to consolidate the plan prepared by the urban and rural local bodies.
• Similarly for each metropolitan area a Metropolitan Planning Committee shall be constituted to prepare a development plan for the metropolitan area a whole.

All the State Governments have either enacted new Municipal Law or amended the existing laws to conform these to the Constitution (74th Amendment) Act, 1992. All the States (except Jharkhand and Pondichery) have conducted the election to the local bodies. All the States (except Arunachal Pradesh) have constituted State Finance Commissions and most of the Commissions have submitted their reports to the State Governments, recommending significant devolution of resources to the urban local bodies. The national Eleventh Finance Commission has also recommended devolution of Rs 2000 crores as grant-in-aid from the Central Government to the urban local bodies.

Constitution (74th Amendment) Act 1992 has made the urban local bodies into vibrant self governing institutions. This has ushered in a new era of urban governance and urban management in India. The future is full of possibilities and excitement for investors, planners, administrators, economists and above all 300 million urban dwellers of India.

Investment Needs in Urban India

The five fold explosive growth in Urban India has resulted in serious infrastructure constraints. Water, transport, housing, electricity, health & sanitation and education are some of the areas of concern. Infrastructure to meet these  requirements calls for huge investments. Investment requirement for housing in urban areas has been estimated at Rs. 526,00 crores (US $ 12.5 billion) in the IXth plan. The India Infrastructure Report (1996) estimates the annual investment need for urban water supply, sanitation and roads at about Rs. 28,035 crores (US $ 6.67 billion) for the next ten years.

The Central Public Health Engineering (CPHEEO) has estimated the requirement of funds for 100 percent coverage of the urban population under safe water supply and sanitation services by the year 2021 at Rs172,905 crores (US $ 41.16 billion). Estimates by Rail India Technical and Economic Services (RITES) indicate that the amount required for urban transport infrastructure investment in cities with population 100,000 or more during the next 20 years would be of the order of Rs. 207,000 crore (US $ 49.28 billion).

To catalyse development of urban infrastructure, 100% FDI under the automatic route has been permitted in housing and urban infrastructure projects.

National Urban Renewal Mission to Improve Civic Amenities in Mega Cities

The Indian Government plans to launch the National Urban Renewal Mission to help large metropolises in the country to tackle the fast pace of urbanization and migration from rural areas which put immense strain on civic amenities. The Mission will cover all cities with a population of over a million and some other towns. The Government has proposed an outlay of Rs.5,500 crore in 2005-06, including a grant component of Rs.1,650 crore for the Mission.

The Mumbai Metro Rail Project, the Mumbai Trans Harbour Link, the Mumbai Western Expressway Sealink and the Bangalore Metro Rail Project are some of the projects which could be supported through the Mission.

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