India, entering 2025, being the world's fifth-largest economy, marking a significant milestone in its growth journey. The landscape of its urban centers is not just expanding but undergoing a profound transformation. Since independence, there has been a remarkable four-fold increase in India's urbanization from 109 million to 460 million people, and by 2050, it is projected to another 416 million, making India the second most urbanized nation after China.

As India moves toward a more urbanized future, the need for comprehensive planning to develop its cities in a sustainable and inclusive manner becomes critical. However, whenever there is a discussion on India's urbanization, the focus often shifts toward major metropolitan cities like Mumbai, Delhi, and Kolkata, while smaller cities or tier-2 and tier-3 cities are frequently overlooked.

This imbalance in attention has significant implications for India's overall urban development strategy. India needs a balanced urban policy that should include the smaller cities also in its developmental plan and for this a close look into challenges faced by the urban centers is essential.

Challenges In India's Current Urban Landscape

Most major urban centers in India are already overwhelmed by excessive population pressures most of the resources of the cities are overstretched. The pollution in these cities are overwhelming way above safe limits, for instance Delhi NCR holds the dubious distinction of being the most air-polluted city in the world, with alarmingly high Air Quality Index (AQI) levels. Other big cities face similar challenges, with environmental degradation becoming increasingly rampant.

Whether it is the polluted Yamuna River in Delhi or the shrinking lake areas of Bangalore, the strain on natural resources is evident. Water resources are overstretched to meet the demands of rising populations. Adding to these challenges is the skyrocketing real estate prices in major cities, which have rendered housing unaffordable for middle- to low-income homebuyers.

Reports indicate that 17% of India's urban population lives in slums, with conditions being even more precarious in megacities like Mumbai, Delhi, and Chennai. This highlights the urgent need for solutions that address housing affordability and equitable access to resources. Apart from these generic problems that major Indian centers face there are some foundational or structural inefficiency that need to look upon in order to draft a comprehensive urban policy.

1. Conflict between justice and relief: Whenever you come across any Indian city, you may notice several projects that are disputed in court. The problem is not just the dispute itself but how these cases drag on for years. As a result, the projects remain stalled altogether. Section 32(g) of the Real Estate Regulation Act, 2016 provides a way for mediation, conciliation, and arbitration. However, due to the lower penetration of such mechanisms and the complexity of land laws under Schedule 7, every state has different land regulations. This inconsistency often leads to cases ending up in court.
    
2. Affordability: A Price-to-Income (PTI) ratio of 3 to 5 is generally regarded as affordable i.e., the average prices of homes should not be more than 5 times the average annual household income. In India, the average PTI is 11, and it is even higher in big cities. This makes housing in Indian cities unaffordable for lower- and middle-class families, hampering their ability to own homes.
    
3. 500 sq meters registration rule: Under Section 2 of RERA, this rule mandates that projects exceeding 500 square meters of land or more than 8 floors must be registered. While this works well for larger cities, it is not suitable for smaller cities because most houses and small projects in such areas do not fall under this criterion. As a result, these smaller projects remain unregulated, leading to haphazard development that degrades the future prospects of these cities.
    
4. Zoning regulations: Only 28% of Indian cities—mostly big ones—have proper zoning rules. The situation is even worse in smaller cities, which lack a clear roadmap for development. Government schemes like the Smart Cities Mission or AMRUT Yojana tend to favour larger cities while overlooking smaller ones. This results in highly unplanned development in smaller cities.

Policy Framework To Tackle These Challenges

The courts should focus on providing relief without hampering the progress of projects. The RERA dispute mechanism should be made robust and ubiquitous to solve disputes and reduce the number of cases going to court. This is especially crucial for smaller cities, which currently receive less attention compared to big cities. By extending RERA's coverage to smaller projects, we can ensure accountability and reduce unregulated construction.

Smaller cities can drive affordability because major urban centers have become saturated, and land costs are higher there. Smaller cities can provide relief in this regard, but for this to happen, lucrative employment opportunities need to be created in these areas. By incentivizing industries, startups, and remote work hubs to set up operations in smaller cities, we can attract more residents and create a demand for affordable housing. This can help bring down the Price-to-Income (PTI) ratio closer to global affordability standards.

Zoning regulations are essential, especially in smaller cities, which are largely greenfield areas. Unlike major cities that have limited scope for new zoning, smaller cities should be zoned in a way that supports future development. This means planning for growth by reserving zones for residential, commercial, and industrial use to avoid haphazard development. Additionally, zoning should align with future needs like public transport, schools, and hospitals to create smart infrastructure.

The 500 sqm registration rule under section 2 RERA also needs modification to create more regulated development in smaller cities. Currently, projects above 500 sqm are highly regulated, while those below this threshold are largely unregulated. To address this, a softer regulation mechanism should be put in place for projects between 250 sqm and 500 sqm. This could involve simplified approvals and lighter compliance checks to keep developmental work in check without burdening builders. By doing so, we can ensure that smaller cities develop in a planned manner while still encouraging construction and growth.

Conclusion
Addressing the challenges faced by Indian cities requires a multi-faceted approach. By focusing on swift dispute resolution through robust RERA mechanisms, smaller cities can become hubs for affordable housing and economic growth. Creating lucrative job opportunities in these areas will drive demand for housing, making it more accessible to lower- and middle-class families. Implementing effective zoning regulations will ensure planned development, while modifying the 500 sqm rule will bring more projects under regulatory oversight.

By adopting these strategies, India can achieve balanced urban growth, ensuring that both large and small cities contribute to the country's economic and social development. This will not only improve living conditions but also foster sustainable urbanization across the nation. In short, smaller Indian urban centers or tier-2 and tier-3 cities offer untapped potential for inclusive and sustainable development.

These cities can act as growth hubs that alleviate pressure on larger metropolitan areas while providing opportunities for balanced regional development. By shifting focus and investing in these smaller urban centers, India can pave the way for a more equitable and sustainable urban future.

Written By: Gunjan Kumar, 1st Year Law Student At CNLU