Cities Get Money For Renewal, But Plan Lacks Vision

Complicating matters further, 40 per cent of Indian cities suffer from severe water stress, and public transportation networks run between 150-200 per cent over-capacity in cities like Mumbai and Delhi. 

Although programmes like PMAY-U have provided 11.2 million dwellings since 2015, the urban housing deficit still stands at 29 million units, highlighting the discrepancy between policy aspiration and performance.

Budgetary Trends

Urban development budgets put top priority on PPPs and digitisation over the past 10 years. The Smart Cities Mission set out Rs 98,000 crore (2015–2023); however, just 22 per cent of projects were finished by 2023. Although PPP receives large allocations, additional niche and incentives must be created in laws to support it.

For instance, the Finance Ministry granted GST exemptions for low income rental house operators, therefore promoting more private sector involvement. Other policies should also carve out this sort of niche. 

The allocation for this was really large and has stayed rather constant in the current Budget proposal.

By digitising land records through the National Land Records Modernisation Programme, pilot states have seen a 30 per cent fall in property conflicts; but, 65 per cent of slum residents lack valid land titles, thereby excluding them. Ramesh Bhatia, urban economist at IEG Delhi, says "private investors see untenable risks without collateral certainty" and "PPPs in housing fail without addressing land titling".

Stability Over Originality

PMAY-U 2.0 keeps its Rs 10 lakh crore allocation (Rs 2 lakh crore yearly) to create 10 million houses by 2030. But given 8.1 million units from past rounds await completion, experts wonder about scalability. 

Meena Sharma, urban planning consultant at National Institute of Urban Affairs (NIUA), says, "States need modular construction mandates and faster approvals — Delhi alone takes 18 months for housing project clearances." The silence of the Budget on prefab incentives or land acquisition changes runs the danger of extending delays.

Though funding for Metro projects stagnates at Rs 19,500 crore, unaltered since 2024-25, Transit-Oriented Development (TOD) in 14 cities continues. "Metro Phase-IV in Delhi is 4 years behind schedule due to funding gaps — TOD cannot thrive without parallel transit investment," cautions Vikram Singh, transport analyst, VRL Logistics.

Concurrent with this, e-bus allocation under FAME-III stays constant at Rs 3,500 crore, short of that needed to reach the 50,000 e-bus objective by 2030.

Renting, PPPs Lack Incentive Depth

While states like Tamil Nadu and Gujarat report 10 per cent private absorption because to low returns, the Viability Gap Funding (VGF) for worker dormitories remains at 20 per cent. Vimal Nadar, senior director (research), Colliers India, notes, "Half of commercial real estate rental returns in affordable sectors hover at 3-4 per cent. REIT inclusion or tax holidays could change investor calculations."

Will States Step Up?

The Rs 8,000 crore grant for state-level urban reforms in the Union Budget aims to promote decentralisation, empowering states to take charge of urban planning. This approach allows for more targeted, effective solutions tailored to local needs.

Kerala’s success with participatory planning, particularly in Kochi where water disparities were reduced by 25 per cent, offers a promising model for other states. However, less developed states like Bihar may struggle to fully utilise these funds due to underdeveloped urban planning departments.

A 2023 NIUA report notes that only 12 states have functional urban planning departments, highlighting the challenges of implementing decentralisation uniformly across the country.

Markets, Digital Government

The PM Svanidhi extension to 500 "haats" by 2030 has distributed Rs 2,300 crore to 2.1 million vendors, increasing the contribution of the informal sector GDP by 1.2 per cent. Although 95 per cent of metropolitan regions already digitise their land records, Dalit and tribal people remain 30 per cent less likely to get digital IDs (CASI, 2024), thereby risking exclusion.

Ultimately, Budget 2025-26 gives continuity top priority while avoiding drastic changes required for climate resilience and equality. Future Budgets must include decarbonisation via green bonds or carbon pricing into housing and transportation, as cities contribute 65 per cent of India's GDP, but emit 70 per cent of CO₂.

Sharma further calls for "metro-linked affordable housing clusters with solar microgrids", whereas Bhatia supports "urban land banks to unlock peri-urban tracts".

Tripling down on tech-driven governance — e.g., AI for waste management — subnational alliances (city-state-private task forces), and financial innovation (municipal bonds mixed with CSR) is the road forward.

As India develops, the decision is obvious: Either follow a paradigm where growth and inclusiveness coexist or copy the injustices of 20th-century cities. The new Budget has to rethink urban ecosystems rather than only distribute money.

Future Priorities

The urban India Budget 2025-26 presents stability as a top priority above ambitious innovation, a good but conservative endeavour. It addresses Indian urban problems, but it lacks the transformational vision needed for transit, small-city growth, and climate action.

Positives include the Rs 10 lakh crore for PMAY-U, focus on metros and TOD. But issues such as prefab building incentives, land acquisition reform and scaling electric buses remain unsolved, hampering progress.

The money is not enough for households' and transportation's incorporation of decarbonising initiatives, including green bonds or carbon pricing.

Although decentralised planning is promoted with Rs 8,000 crore for states, many areas — including Bihar — lack the capacity to make suitable use of these funds. Inadequate measures to link metros with reasonably-priced homes or support urban land banks stunts sustainable growth.

The Budget has to focus on urban mobility — including integrated transit systems and more funding for e-buses — with great importance. Support for smaller cities should especially be offered with regard to infrastructure and water.

Furthermore, it is important to enhance distributed planning in developing nations by methods of capacity-building. Key now is to reconsider urban environments, combining sustainability with inclusiveness and development.