India Will Soon Urbanise Faster Than China

In 1950, around the time when India became Independent, 17 per cent of Indians lived in urban areas, while only 13 per cent of the Chinese did. But, by 2011, things had changed significantly. Census figures show over 31 per cent of Indians lived in urban areas in 2011, while over 51 per cent of the Chinese citizens lived in urban areas in that period.

Why? Urbanisation in China has been much faster since the 80s, because economic reforms came much earlier in China. Economic reforms were also carried out more intensely in China than in India. Nevertheless, by 2025, India and China will account for much of the growth in urbanisation throughout the world. Though China urbanised much faster than India, according to the projections of the United Nations, urbanisation in India will be faster than China from 2020 onward. Unlike India's real estate markets, the China's real estate markets are witnessing a recovery.

India and China face different challenges in a way. So, far India has not invested enough in urban infrastructure while China has invested more than enough in some cities. The investment in China has been so high that it has resulted in many ghost cities now. Inventory has been growing in Tier-II and Tier-III Chinese cities. The government even started a campaign to get the rural Chinese to migrate to these cities. However, housing prices in China started rising, and the housing prices in even Tier-II and Tier-III Chinese cities are rising. While some urban thinkers are of the view that China made huge blunders by creating these ghost cities, many others think that this will equip Chinese cities to handle the growing urbanisation.

China has other advantages, too. Housing prices in major Chinese cities are only a fraction of that of comparable Indian cities. For example, according to some estimates, housing prices in Beijing and Shanghai are about one-fifth of that in Delhi and Mumbai, if adjusted for income levels. This would allow more people to move to large Chinese cities because real estate prices hinder intercity migration more than anything. Moreover, Chinese cities have also allowed people to consume more floor space. For example, from 1984 to 2010, China raised the floor space consumption in Shanghai from 3.65 sq m per person to 34 sq m per person. In the same period, the rise in average floor space consumption in Mumbai was modest.

Air pollution and road congestion are problems both India and China face. India and China have come of the most polluted cities in the world. Cleaning up and decongesting these cities is a daunting task. Without rapid economic progress in the next few decades, India and China will not be able to handle these problems well.