India is on the rise and, for the first time, has claimed the top spot in an annual study ranking dynamic cities.
JLL’s latest City Momentum Index (CMI) ranks Bangalore highest for the first time, the result of a realignment within Asia Pacific that saw India unseat China as home to the region’s most dynamic cities.
And Bangalore was not the only stand-out Indian performer – of the top 30 cities in the CMI, six are in India.
The CMI tracks the changing speed of a city’s economy and commercial real estate market, identifying those cities that have the most dynamic attributes over the short and long term. The 134 cities covered by the CMI were assessed and ranked using 42 variables including change in GDP, population, corporate headquarter presence, commercial real estate construction and rents. Other factors included education, innovation and environment.
“Bangalore has claimed status as one of the world’s premier technology hubs, but other Indian Tier II cities – Hyderabad and Pune – are not so far behind, ranking fifth and 13th respectively,” says JLL’s Jeremy Kelly – Director, Global Research. “India’s Tier I megacities of Chennai (18th), Delhi (23rd) and Mumbai (25th) also feature in the Top 30, although their rankings are compromised by poor scores on environmental sustainability.”
The CMI reveals several factors are at play in India’s rise. A shift to high-value activities have helped drive Bangalore and Hyderabad, placing them in the ‘Agile High-Value Emerging Cities’ category.
‘Emerging Megacities’ in India, such as Chennai, Delhi and Mumbai have been fuelled by dynamic labour markets, although as Kelly points out: “This group faces significant infrastructure and quality of life issues, with high levels of inequality, congestion and pollution hindered by weak city governance.”
However, while the dynamics of India’s rise are evident, the question remains – can India retain its momentum? Kelly believes it can, but cautions that the country must address looming social and environmental speedbumps.
“India’s growth rate is projected to stay above 7 percent a year until 2020 so, in the short term, its momentum is set to remain strong,” he says. “Likewise, those Indian cities’ real estate markets look set to maintain their current high levels of take-up and construction for at least the next three years.”
“At the same time, India’s cities are maturing – a number of locales have set themselves up as hubs for outsourcing and IT services, and the shift to higher-value services is ongoing. Increasingly, domestic Indian firms and local start-ups are emerging as major players.”
“There is still much work to be done, however. Environmental degradation and air pollution remain huge and growing problems, infrastructure is lacking in many areas, and affordable, good-quality housing is also a concern.”
“The imperative for India is not necessarily to maintain this level of momentum, but to use this momentum and rapid transformation to modernise, strengthen and improve its cities. While growth is currently strong, pollution, lack of infrastructure and housing remain major issues across the country. Addressing these issues is key to India’s staying power.”
The Indian Government is aware of these potential roadblocks, and is working to head them off.
“There are clear moves from the Indian government to sustain its growth, including the ‘Make in India’ scheme to transform the country into a manufacturing hub, and an ambitious ‘smart cities’ plan,” Kelly says.
“These sit alongside significant reforms to the national tax system and the real estate market in order to boost the business environment.”
“Meanwhile, individual markets have seen assistance from regional governments – for example, the establishment of the T-Hub incubator space in Hyderabad – while major infrastructure projects are underway across the country.”
Although there is a natural desire to compare the rise of India’s cities to that of its neighbour, China, Kelly stresses that the dynamics of these countries are very different.
“Indian and Chinese cities are at different stages in their evolution, and should not be seen as direct competitors,” he says. “Indian growth rates are currently outstripping those seen in China, but Chinese cities have already been through this phase of rapid economic development.”
“The Chinese economy is now entering a ‘new normal’, with slower but more sustainable rates of growth and a transition towards higher-value activities. Indian cities, on the other hand, are only just beginning to ramp up their infrastructure and global connectivity.”