Subcontinental shift: The rise of India's cities

India's cities are entering a new era of rapid development, fueled by a focus on tech or industry, which puts them among the most dynamic in the world.

March 10, 2017

Many of India’s cities are entering a new era of rapid development, fueled by a focus on tech or industry, which places them among the most dynamic in the world.

Known as the Silicon Valley of India, Bangalore is fast becoming a global tech hub, attracting multinational companies including Apple, Google, LinkedIn, Oracle, and IBM. Hyderabad, home to Microsoft’s largest research campus outside the U.S., is the site of India’s largest start-up incubator, while port city Chennai is drawing comparisons with Detroit as major car brands set up shop in its expanding industrial zone.

“India overall has been quite dynamic over the last two and a half years,” says Ashutosh Limaye, Head of Research and Real Estate Intelligence Service for JLL in India. “Policy reforms have raised transparency in government, modernised city administrations, and improved business operations, all of which contributes to change that is occurring faster than before.”

Building a name in tech

Bangalore, named the world’s fastest-changing city by JLL’s City Momentum Index, has grown to 8.5 million inhabitants, up from 5.7 million in 2001, in part due to the creation of jobs that draw young workers from all over the country.

Boeing recently opened its largest engineering technology centre outside the U.S. in Bangalore, with most of the roles filled by local skilled workers, while JC Penney threw open the doors of a 150,000 square foot tech space that will hire 1000 local workers.

“Bangalore, with its abundant talent, a conducive ecosystem for entrepreneurship and quality real estate, puts India on the map for IT development,” says Naveen Nandwani, Managing Director, Bangalore and Kochi at JLL. As well as attracting major tech companies, the city is establishing itself as an outsourcing hub for high-value sectors in IT, such as research and product development.

These factors have driven stable growth in Bangalore’s commercial real estate market, where low office vacancy rates and healthy rises in office rents have allowed local developers to improve and refine their products for what could soon be a more sophisticated, more demanding market.

Local talent fuels development

Home-grown talent also has a role to play in creating buoyant local real estate markets. Tech startups Flipkart and InMobie lease large developments in Bangalore, while in Hyderabad, plans are in place to expand start-up incubator T-Hub, a partnership between the government and academic and corporate bodies, from 70,000 square feet to 350,000 square feet.

Like Bangalore, the city is experiencing very low office vacancy rates as job growth continues to climb. Salesforce will create 1,000 jobs by 2020, making Hyderabad one of its largest engineering and customer success centres in the world, while a sister city agreement with two Japanese metro areas is attracting Japanese corporate investment in the state of Telengana.

Health-tech is an up-and-coming sector in Pune, already home to startups as well as larger research institutions, while in Delhi, a mega-city where Prime Minister Narendra Modi launched the StartUp India incentives program, is seeing local startups such as Snapdeal and Ibibo Group emerge in its dynamic technology scene.

Good governance, better infrastructure

Many of the factors that are driving Indian cities to develop so rapidly can be attributed to the country’s Smart City programs that aim to create a cohesive structure for India’s cities – from social planning and transport to the implementation of self-funding initiatives such as the goods and service tax act that was passed last year.

“The ultimate objective is to optimise city life through good governance, better infrastructure and financial planning so that cities don’t need to depend on grants,” Limaye says. “By and large, all Indian cities are undertaking infrastructure projects that are improving city life further.” Hyderabad and Bangalore are currently building metro networks to help circumvent both cities’ increasing traffic.

New, modern airports are in the works for both cities; while across India, cities are turning to eco-friendly roads, freeways and toll roads in an effort to sustainably transport their skyrocketing populations around increasingly clogged urban centres.

Take Chennai, the fourth-most populous metropolitan area in India with 8.6 million people as of 2011. With 4.6 million of these living within its 426 sq km area, Chennai will soon see an ambitious city-wide transport plan implement pedestrian footpaths, plazas, cycle lanes, cycle sharing and a metro system.

Facing up to challenges

Despite these improvements in infrastructure and increasing corporate interest from overseas, the bulk of real estate investment is yet to arrive in India, with the country’s environmental challenges putting off some potential investors.

Scientists at the Indian Institute of Science report that the unplanned, rampant urbanization of Bangalore could lay waste to its living ecosystems in five years, while in Delhi, the most polluted city in the world, smog continues to spike to dangerous levels.

“Given the sheer pace at which India is going through urbanization, no matter how fast infrastructure is developed, it is outstripped by city growth,” Limaye says. “Over time, the challenge will be to balance this growth with environmental sustainability.”

Recently passed environmental laws could help circumvent a looming crisis, Limaye notes. For example, under Prime Minister Modi, solar generation is a priority, with Cochin Airport in the state of Kerala now the world’s first fully solar-powered airport.

As India’s national economy surges, outstripping China’s as the world’s fastest growing major economy, the planned growth of Navi Mumbai could set an example for the rest of India. Where India’s most populous city has long been dogged by traffic, population and overcrowding, its satellite city of Navi Mumbai is evolving as a destination for young, educated Indians to settle, with modern infrastructure, top-notch medical facilities, and a four-mode transport system – rail, road, air and water – that has kept traffic at minimal levels.

“Indian cities still have a lot more to offer, and there are very sensible state governments in place,” Limaye says. “India is maturing – and the world appreciates that its potential will be justified.”