India Smart Cities Market Outlook - Investments and Opportunities

India Smart Cities Market Outlook - Investments and Opportunities

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  • A smart city is a dynamic solution that varies from city to city and country to country. The dynamic nature of the market in India, poses different challenges form what the solution providers and suppliers in the target market have faced in the other regions such as Europe and North America. According to the 2011 census, approximately 31% of the Indian citizens were residing in the urban areas. The urbanization level in India is set to increase further and is expected to reach about 600 million by 2030.
  • Providing efficient and effective services pose a considerable challenge and has augmented the developments in the smart city project and has led to the government to use all available channel to realize their long term goals. Some of the variables that impact the stakeholders business opportunity in the smart city market comprise of (i) level of development (current and planned), (ii) affinity and willingness for changes and reforms, and (iii) resource availability and aspirations of adopters of the smart city solutions.
  • For a successful realization of the smart city planning and execution, close collaboration and information exchange becomes a necessary course of action between the planners and the solution providers. Smart city concept in the Indian market incorporates two segments, first being the Core Infrastructure Elements and the second one being Smart Solutions Elements. Vendors that target the demand in the infrastructure segment have opportunities in the water, electricity, mobility, waste management, health and education, safety, and security, and IT connectivity and digitalization sector.
  • Smart solutions elements aim to enable the infrastructure with smart components such as smart metering, monitoring and using analytics to improve the quality of the service. These segments create an opportunity for vendors that are into the market, supplying the products and services in the target segment. The strategy for the smart cities plans in India is towards three sections, first one is retrofitting (extended to more than 500 acres), redevelopment (more than 50 acres) and city extension (developing previously vacant area of more than 250 acres). These are augmented with a citywide initiative in which smart solutions are to be applied to an extended region. GIFT city in Gujarat, for instance, is an example of a city extension where the focus is on new area development.
  • These three strategic sections are expected to create a huge opportunity for the market players in this country by prioritizing the target sections. The smart city market in India is currently extended to 100 cities that have been selected in different competitive rounds and offer the market vendors scope for selective bidding. Owing to the competition for recognizing the best smart city from the government, to create a niche identity, smart cities projects have initiated and welcomed unique, innovative solutions. For instance, Coimbatore municipal corporation plans to place smart benches across the city with solar tree following the sun movement and keep the bench occupants in the shade. Similar city-specific innovative solution adoption is expected to drive the vendor in the market to offer a customized solution to create competitive distinction.

Profiling Round

Number of Indian Cities

1

20

2

12

3

27

4

30

5

9

Source: Ministry of Housing and Urban Affairs, MoHUA, Government of India.

FINANCIAL OPPORTUNITY IN THE INDIA SMART CITIES

  • In terms of the market opportunity created by these smart city plans, initial 329 projects in the first 60 selected smart cities were valued at more than INR 1 billion. Addition of new cities has further added to the opportunity in the market. For instance, twenty cities were selected in the first round in January 2016, followed by more rounds in September 2016, June 2017 and January 2018, taking the tally to 100 cities with the total count of approved projects at 5,151. According to smart cities mission India, most of the selected 100 cities had recieved INR 1.96 billion seed funding by March 2018.

  • According to NITI Aayog stats, the total revenues of all Indian Urban Local Bodies (ULBs) amounts to less than INR. 1.5 trillion, approximated to be meager 1% of India's GDP. The deficiency of infrastructure affects the ability to attract investment and push economic growth. To provide the impetus for growth, the seed funding of the projects in the cities selected, are done with each city getting INR 5 billion of central funds, matched equally by the state. The rest of the money is independently raised through user charges, municipal bonds, bilateral and multilateral borrowings, PPPs, National Investment and Infrastructure Fund (NIIF) and convergence with other government schemes to implement its plans. This additional funding requirement adds to the opportunity for the stakeholders, including the vendors in the market. This creates an ecosystem where collaboration among the stakeholders in the project is improved and offers a competitive advantage for the vendors who are among the early bidders in the market and have some experience in carrying such projects.

  • One of the challenges in the market has been the slow progress of the projects and the impact of the projects are expected to be visible beyond 2022. For instance, according to the Ministry of Housing and Urban Affairs, India,  by February 2017, just 3% of the approved plans were completed, the progress by July 2018, this had reached up to 21.56% of approved projects and by December 2018, the number of completed projects had risen to close to 33%. Over the forecast period, the smart city projects are expected to gain pace as the selection for the targeted 100 cities is has been almost complete and focus of the government is expected to towards the completion of the started projects. This creates a huge opportunity for the market players that are interested in investing in the project's funding in these cities and offer their solutions in the market. Vendors are also expected to gain the first-mover advantage and recognition in the market that can help them to get new projects in other cities, in case the plan is extended to incorporate more number of cities in future.
INTRODUCTION                      

 

RESEARCH METHODOLOGY                       

 

EXECUTIVE SUMMARY

 

GOVERNMENT OF INDIA SMART CITIES INITIATIVE         

India Smart Cities Development Plan      

Phased-Rollout of Smart Cities  

Investment Scenario of Smart Cities in India (Area-Based and Pan-City)

Smart Cities Implementation Strategy

Smart Cities Implementation Challenges

Convergence with other Developmental Missions (Mission Highlights, Investments, and Opportunities)

AMRUT

HRIDAY

Swachh Bharat

National Electric Mobility Mission

National Solar Mission

National Water Mission

Housing for All

Make in India

Other Missions in Progress

                

SMART CITIES DEVELOPMENT MODEL

Smart City Selection Criteria

Smart City Administration (Central, State, City, Project)

Smart Cities Operating Framework

Source of Funds

Role of PPP in Smart City Projects

 

VALUE CHAIN ANALYSIS

Stakeholder Framework

Key Vendors Assessment

Bid-approach to Smart City Project

Foreign Collaborations

 

SMART CITIES DETAILED ANALYSIS

Smart Cities shortlisted in Round 1

Smart City 1 - Bhubaneshwar (Similar Analysis for each Smart City)

Regulatory Framework

Investment Scenario

Area-Based Investments

Pan-City Smart Solution Investments

Key Projects and Opportunity Analysis

Smart City 2 - Pune

Smart City 3 - Jaipur

Smart City 4 - Surat

Smart City 5 - Kochi

Smart City 6 - Ahmedabad

Smart City 7 - Jabalpur

Smart City 8 - Visakhapatnam

Smart City 9 - Sholapur

Smart City 10 - Davangere

Smart City 11 - Indore

Smart City 12 - New Delhi Municipal Council

Smart City 13 - Coimbatore

Smart City 14 - Kakinada

Smart City 15 - Belagavi

Smart City 16 - Udaipur

Smart City 17 - Guwahati

Smart City 18 - Chennai

Smart City 19 - Ludhiana

Smart City 20 - Bhopal

Smart City Winners in Round 2 (13 Cities)

Smart City Winners in Round 3 (27 Cities)

Smart City Winners in Round 4 (30 Cities)

Smart City Winners in Round 5 (9 Cities)

 

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