Budget 2025: How cities can drive India's sustainable urban development goal forward

India's urban population is fast growing and its cities are expanding rapidly. According to the UN Department of Economic and Social Affairs, over 500 million Indians live in urban areas. The economic survey of India 2023-24 further predicted that more than 40 per cent of the population will reside in urban areas by 2030.

The government needs to be prepared to cater to the growing needs of cities. Majority of economic activities are projected to happen in urban regions, with 70 per cent the GDP coming from these areas, according to Auguste Tano Kouame, World Bank’s Country Director for India.

“Globally, economies in the new-age world are driven by a services industry that is people dependent, and therefore a significant portion of the population resides in cities, which are hubs for services-oriented firms,” said Bhavik Bhandari, Chief Sales and Marketing Officer, Ashwin Seth Group.


“Indian cities are part of this phenomenon and many of them have dramatically transformed in recent years with increased investments in transport, energy, and digital networks empowering cities to support industries, create jobs, and improve living standards. A comprehensive urban renewal program is essential to address aging infrastructure and improve quality of life since many age-old structures can be repurposed to align with modern day living,” added Bhandari.

In view of the growth, the Indian government had urban development as one of its nine priorities of the 2024 budget. The government had allocated Rs 82,577 crore for urban development in the previous budget. This included key schemes like the lower stamp duty for property purchased by women, establishing weekly street ‘haats’ in select cities, focus on transit related development in 14 large cities and water management. Additionally, the PMAY 2.0 scheme was introduced in the budget.

“The Government’s initiative to build 10 million houses under the Pradhan Mantri Awas Yojana (PMAY) is a commendable step, further complemented by measures such as enhanced home loan subsidies and stamp duty reductions for women. While the real estate market continues to show growth, the affordable housing segment has faced a decline, with housing prices in key cities rising by as much as 46 per cent,” Kaushal Agarwal, Co-Founder & Director of The Guardians Real Estate Advisory, told ET.

The pre-budget consultation meeting involving Finance Minister Nirmala Sitharaman discussed issues like affordable housing, rental housing, slum redevelopment, and infrastructure development. The government is also looking for the creation of a better environment for growth.


Niranjan Hiranandani, Managing director of Hiranandani Group, had said, “In my whole career of 40-plus years, this is the first year where affordable housing growth is negative. It has never happened in my whole career. So I think the focus on the PM Awas scheme for the purposes of incentivizing affordable housing was a major thing.”

Pradhan Mantri Awas Yojna

The Pradhan Mantri Awas Yojana Urban (PMAY) 2.0 was given a budget of Rs 10 lakh crore alone for urban housing.

“The Pradhan Mantri Awas Yojana stands out as a critical initiative by the government, addressing this demand-supply gap in housing and making homeownership more accessible, particularly in urban areas,” Shikha Kapur, Partner, Deloitte India said.

The scheme aims to build 1 crore affordable houses in urban areas for people to live in. The growing urban population means that these areas will be the centre of growth in the near future, and basic shelter facilities for all are important.

“By promoting mixed-use projects, green infrastructure, and planned densification, the PMAY program has the potential to completely transform urban housing. Prioritising these components in the next budget could spur the development of lively and inclusive urban areas, meeting housing demands and improving community quality of life,” Dikshu Kukreja, Managing Principal, CP Kukreja Architects, told ET.

“PMAY is not only facilitating affordable housing but is also contributing to the creation of new infrastructure, which aligns with broader urban development goals. Ultimately, PMAY is paving the way for a more sustainable and inclusive urban environment, where housing for all becomes a reality,” Deloitte's Kapur added.

Focus on sustainable development

While the PMAY scheme is one of the major urban development projects of the government, it would want to focus on sustainable development, keeping climate change and its consequences in view.


As the world stares at a climate crisis, the Indian government has set certain environmental goals to sustain in the future. Several greenfield projects have been introduced and these have to coincide with urban development planning.

“The rapid growth of urban areas will put massive pressure on natural infrastructure such as soil, water, forest, wetlands etc. To overcome such critical and complex challenges, stronger budgetary support for the development of next-gen urban areas which are sensitive to water and ecology,” said Jaya Dhindaw, urban development professional and researcher specialisnig in sustainable development.

The 2024 budget had allocation for water management in cities. The initiative aimed to bring together the Union Government, state governments and multilateral development banks for promoting water supply, sewage treatment, and solid waste management projects in 100 large cities. These projects will also utilise treated water for irrigation and filling up nearby tanks.

“This budget should allocate greater reform linked incentive provisions to encourage cities to transition towards becoming water sensitive cities. The reforms should include adoption of water sensitive urban planning and development approaches for enhancing the capacity of urban areas to absorb, infiltrate, store, delay, retain, purify, reuse and drain storm water and sewage effectively and should ensure that urban development, economic growth and ecological health are in balance,” added Dhindaw.

Apart from water management, the budget would have to focus on overall sustainability. Urban areas need to be more eco-friendly that not only support growth but also support the future generations.

“Partnerships that drive sustainable infrastructure projects must be explored, along with incentives for the use of eco-friendly construction materials such as steel slag and recycled plastic waste for road development,” Y R Nagaraja, Managing Director of Ramky Infrastructure, said.

Bhandari called for further tax benefits for green projects and waste water management solutions.

“Sustainability should take center stage in the budget. Tax benefits for green-certified projects, subsidies for renewable energy adoption in construction, and incentives for waste and water management solutions are critical. Policies encouraging the development of eco-friendly housing will align the real estate sector with India’s commitment to global environmental goals,” Bhandari said.


Kukreja, on the other hand, called for allocation of large funds to combat air pollution and water management in order to develop resilient and sustainable cities.

“The urgent need for addressing air pollution must take precedence in urban development priorities. Allocating substantial funds to combat this crisis is essential — what’s the point of a Viksit Bharat if urban citizens are inhaling poison every second? Our cities are also struggling under the burden of waste, turning into sprawling garbage dumps. Increased and dedicated allocations for waste management are crucial to restoring the health of urban environments. In order to create resilient and sustainable cities, urban water management is essential,” Kukreja said.

Inclusive urban development

While there is a need for sustainable development, the government's focus should also be on inclusivity and must be extended to tier 2 and tier 3 cities.

“The vast majority (about 92 percent) of India’s urban centers are small towns with a population of less than 100,000. Smaller towns have a high potential for accommodating future urbanization. However, they lack capacities and skills to design, and deliver resilient infrastructure and service,” Dhindaw said.

“We need to focus on educational institutes and vocational training in these centres to build a skilled and relevant workforce- while uplifting the quality of life for the people living there,” she added.

Apart from housing and sustainable development projects, the government will also need to focus on transport and mobility within cities.

“We hope to see increased allocations for infrastructure development, especially for seamless connectivity, urban mobility solutions, and smart city projects. Incentives for real estate developers to invest in Tier 2 and Tier 3 cities could decentralise urbanisation and unlock the potential of underutilised regions,” Bhandari said.