India’s cities are crumbling. The rich are seeking urban oases

India’s top metros—Delhi, Kolkata and Mumbai, home to 75 million people—rank among the world’s 10 most populous cities. However, “population scale has not translated proportionately into urban productivity, liveability or global economic influence,” the Union government’s Economic Survey 2025-26 admits.

While calling cities “engines of growth, magnets for talent, and crucibles of innovation”, the Survey also labels them “sites of daily strain: long commutes, uneven services and shared spaces that often fall short of collective expectations”.

Indian cities score low in their liveability quotient despite allocations to urban local bodies (ULBs) by the Ministry of Housing and Urban Affairs and the XIV and XV Finance Commissions topping Rs 8.36 lakh crore in the last decade, according to a new report by Janaagraha and the Jana Urban Space Foundation, not-for-profits working to transform the quality of life in the country's towns and cities.

The key reason for this lapse, experts say, is the fragmentation of urban functions across ULBs, development authorities, state line departments and parastatal agencies. Essentially, local governments haven’t been empowered to do whatever is expected of them.

India’s urban population is expected to grow from 522 million today to 723 million by 2050.

If nothing is done to improve the way cities are managed, Akash Pharande, managing director of Pharande Spaces, a real estate developer in Pune, expects “escalating water wars, public-health emergencies and economic drag” to impede life in them.

Already, India’s affluent—desirous of bettering their lifestyle—are shifting to integrated townships and gated communities to make up for deficient urban public services. But their choosing to do so is worsening conditions for the less privileged.

“When the wealthy disengage, cities see deteriorating services and weakened political pressure for municipal reform,” said Amit Kapoor, chair, Institute for Competitiveness, the Indian knot in the global network of the Institute for Strategy and Competitiveness at Harvard Business School.

Urban service delivery failures are a national challenge

Sonia Sarkar, 45, shifted from rental accommodation in Delhi’s Chittaranjan Park to a gated complex in Noida in 2015, a move prompted by the need “to own a place because how long could I have kept living out of rented accommodation”, the Kolkata-native told IndiaSpend.

Sarkar opted for an apartment in a gated community consisting of 11 high-rise buildings in Noida because “high-rises started booming when I booked the apartment in 2010”. Safety, an important element when a single woman like Sarkar goes house-hunting, was much better in the complex than in a building opening onto the street in the same area, even if it meant contending with the residents’ welfare association’s rules that disallow a cab or three-wheeler into the premises.

The complex is clean “because maintenance employees are accountable to residents”, added Sarkar. The electricity back-up works, and the pavement stays intact unlike the road beyond, which “is dug up by civic authorities without any prior intimation of the utilitarian project they are undertaking”.

Unsafe, dark, potholed roads in cities across India are an outcome of governance vacuums. Speaking of Pune, Pharande points out that “three years without elected corporators had left the city’s residents chasing departmental signatures for streetlights and pothole repairs”.

With no general body, budget oversight has vanished, and project slippages have also multiplied, added Pharande, citing Pune’s Mahalunge-Maan town planning scheme, the region’s flagship hi-tech city launched in 2017 as an example. Nine years on, “flood-line errors, litigation and a lapsed contractor have left 250 hectares of half-built towers surrounded by dirt tracks, tanker water and construction debris”.

Essentially, “legal RERA-approved buildings now stand in an officially unapproved city”, he said.

Meanwhile, previously serene Pune suburbs such as Baner, Kalyani Nagar, and NIBM Road have seen bungalows flipped into restaurants, tuition centres and hostels without parking, fire access or waste systems, turning residential lanes into 24×7 traffic corridors.

Bureaucratic bottlenecks for routine civic issues as well as municipal urban planning failures are a national challenge, according to Pharande. “While 39 percent of state capitals lack an active master plan, those that do routinely see spot-modifications, plots are de-reserved within months of notification to monetise land before public scrutiny.”

Integrated townships that boast green spaces, and harmonious commercial and residential spaces—a step beyond gated communities—represent India’s best urban model today, he said, adding that “bringing such harmony at a city level is a monumental task given the decades of damage and neglect that have already passed, and requires far more political will than we have seen to date”.

With affluent India shifting into gated communities, what of the rest?

Two in five households in India’s top 50 cities today opt to live in a gated complex, up from one in three households five years ago, according to a new report from Redseer Strategy Consultants on the rise of gated communities in India.

Leading metros such as Bengaluru, Gurgaon, and Hyderabad have a lot of supply and matching demand for gated community living, including integrated townships, according to Santhosh Kumar, vice chairman of the ANAROCK Group, real estate consultants.

“Other cities seeing rapidly improving infrastructure and real estate development options at lower price points like Pune, Lucknow, Indore, Chandigarh, Jaipur, Nagpur, and Coimbatore are capturing 15-20 percent of the annual demand,” he said.

Satellite images of leading cities in 2003 and 2020—which clearly show increasing densification, and as a result a loss of green cover and shrinking water bodies—as IndiaSpend reported in January 2026, explain why this shift has become a national trend.

Those who can afford a better lifestyle are relocating to pockets that promise to deliver what they’re looking for.

Forty-four-year-old Arshia and her family relocated from an ungated apartment complex in Panchkula, Haryana, to a gated community in Noida consisting of eight high-rise buildings, a place she saw as “safer, especially for parents and children, and offering better quality living by virtue of a host of amenities—a clubhouse, swimming pool, play area, hobby classes, building maintenance and so on".

Advertisements for upcoming or exclusive communities promise landscaped open spaces, play areas, gyms, club houses, sports centres, all of which are supposed to be part of city development plans, but aren’t.

So while on the one hand, “shortcomings in municipal service delivery have played a role in the rise of gated communities”, Ravi Shankar Singh, managing director of Residential Services at Colliers India, a real estate advisory, also attributes this trend to “lifestyle aspirations and the desire for hassle-free living”.

“For many families, the appeal lies not in escaping the city, but in experiencing a more organised, community-oriented and convenient version of it,” said Singh.

The COVID-19 pandemic, which introduced the hybrid work formats that endure even today, also gave self-contained living a new meaning, and thereby majorly contributed to the rise of gated communities, added Kumar.

How municipal lapses impact India’s social fabric

Framing the rise of gated communities as a story about the wealthy and their preferences misses the entire picture, and the consequences thereof.

“The rise of gated communities is also a story about who bears the cost when public systems fail and that cost is not borne equally,” said Kapoor of the Institute for Competitiveness.

Residents of gated communities are wealthier than those living outside gates. Redseer has estimated their per capita income to be about $14,500, five to seven times the India average. Essentially, they are wealthy enough to pay a municipal tax for living in a city and a monthly maintenance fee to a Residents’ Welfare Association for water, waste management, security and green spaces.

In choosing so, however, they are disengaging from urban governance, a disengagement that people who cannot choose likewise—the sanitation worker, the auto driver, the family in the resettlement colony 3 km away—pay a heavy price for.

The “active engagement of citizens, especially in critical domains like budget formulation and urban development planning… guarantees that the concerns and perspectives of underprivileged individuals receive top priority in policy formulation”, according to the Institute for Competitiveness’s 2024 report on municipal performance, which evaluated governance, services, technology, finance and planning in 134 cities.

“When a city’s most resourceful residents disengage, it can create conditions where the needs of the less affluent are more easily deprioritised and over time, the city’s sense of shared responsibility can quietly narrow,” said Kapoor.

In India, gated communities have another drawback, tending to be exclusionary along intersecting lines of class, caste, and often religion, said Ubaid Sidique, research associate, Department of Political Science, Aligarh Muslim University. He is the author of a March 2026 paper in Discover Cities on sustainable urbanisation in non-metropolitan India, which looks at reasons for the failure of public services in Aligarh.

Sidique points out that housing societies in metros like Mumbai, Delhi and Ahmedabad routinely, albeit informally, employ discriminatory screening practices against people of scheduled caste, Muslim or other marginalised backgrounds.

In doing so, “gated communities risk hardening pre-existing social hierarchies into the very geography of our cities”, he said. “The sanitised enclaves where the urban elite effectively secede from the broader city restrict access to roads, parks and amenities that could otherwise serve the wider public.”

Alongside this deepening socio-spatial inequality, Sidique said gated communities also raise concerns about the weakening of the social contract between citizens and municipal institutions.

Why municipalities fail to deliver public services

The Twelfth Schedule of the Indian Constitution, added in the 74th Constitutional Amendment of 1992, outlines the powers, authority, and responsibilities of municipalities. With this amendment, for the first time in independent India, cities got a constitutional identity, and were envisaged to have elected, empowered, locally-accountable city governments.

However, a Comptroller and Auditor General (CAG) audit of ULBs across 18 states in 2024 found that while on average, they have been entrusted with 17 of 18 listed functions, only four of these functions have been entrusted with full autonomy.

Urban planning, the function that would most directly prevent the fragmented, infrastructure-starved sprawl that drives people behind gates, is among the least devolved functions of all, Kapoor pointed out.

ULBs in 10 of 18 states had no powers over the recruitment of their staff and the average staff vacancy against the sanction strength stood at 37 percent.

Cities also need sufficient resources to run but India’s municipalities are under-resourced, and don’t have the authority to make financial decisions.

The CAG’s audit found that ULBs have a resource-expenditure gap of 42 percent, a gap that has steadily been growing despite the Twelfth Schedule. Own revenue made up 89 percent of municipal revenue in 1961, but barely 51 percent in 2021.

“GST reforms introduced in 2017, while nationally necessary, stripped ULBs of a further 19 percent of their own-source revenue as octroi, entry tax and local surcharges were absorbed into the central pool without direct compensation to cities,” noted Kapoor.

ULBs also don’t have the autonomy to decide their own property tax rates, which Kapoor said is “a structural incompatibility between the scale of India's urban ambition and the fiscal architecture actually available to its cities”.

Presently, cities realise only 56 percent of their own property tax demand, and that too, Kapoor points out, “at anaemic rates”.

While urban India generates 66 percent of the country’s gross domestic product (GDP), municipal own revenues—primarily from property taxes and user fees—are less than 1 percent of GDP. Property tax yield is estimated to be between 0.16 percent and 0.24 percent of India’s GDP as compared to 1.9 percent of GDP in OECD countries.

Insufficient revenue leaves cities heavily dependent on government grants but financial transfers to municipalities amount to 0.45 percent of GDP in India, much lower than 5.1 percent in Brazil, 5.4 percent in Indonesia, 2.5 percent in the Philippines, and between 6 percent and 10 percent in parts of Europe, according to the Institute for Competitiveness.

Its report evaluating municipal performance clearly saw “adequate intent and absent authority in practically every city”, said Kapoor. “This points to an issue of delegation without devolution.”

He attributed this to the wording of the 74th Amendment. While the Amendment imposes mandatory obligations on states with respect to elections and institutional structure, the devolution of the 18 functions listed in the Twelfth Schedule remains discretionary.

“Article 243W’s use of ‘may’ rather than ‘shall’ has left the pace and extent of functional devolution to the discretion of state governments,” said Kapoor. “That permissive language has, over time, created space for state governments to centralise authority in ways that were perhaps not originally intended.”

IndiaSpend has reached out to the Ministry of Housing and Urban Affairs for comment on what the ministry is doing to alleviate this situation. We will update this story when we receive responses.

The potential for urban local body reform

Reform would involve the genuine devolution of functions from state governments to municipalities. For this to happen, “India needs a shift in political culture,” said Sidique. “Without that, India's urban governance ecosystem will continue to operate within a deeply centralised state-level framework, wherein chief ministers and state bureaucracies treat municipalities as extensions of state authority rather than as autonomous democratic institutions.”

Until that occurs, to improve service delivery, “coordination across ULBs, parastatal agencies and line departments, the different agencies entrusted with different functions, is a must”, said Sidique.

Cities must be given the authority to assess what personnel they need, advertise positions, select candidates and determine pay scales.

“Nothing else will work if the institution at the centre of delivery cannot hire the people it needs,” said Kapoor. “Cities cannot function without adequate, well trained and remunerated engineers, planners, public health officers, accountants and administrators.”

Cities also need more revenue resources and greater control over them.

The 16th Finance Commission recommended significant fiscal corrections for ULBs include an allocation of Rs 3.56 lakh crore for 2026-31, more than double the previous Commission’s outlay. With this, the urban share of local-body grants will rise to an all-time high of 45 percent. Sidique emphasised the need to “make fiscal decentralisation a priority so that ULBs have greater control over revenue sources”.

The spending of this allocation matters more than allocations by MoHUA because the latter’s allocations have been predominantly consumed by metro rail and affordable housing projects in the last decade, according to analysis by Janaagraha and the Jana Urban Space Foundation.

In fact, more than a third of the MoHUA’s current year budget is for metro projects alone. Consequently, schemes covering the delivery of everyday urban services like Swachh Bharat Mission (Urban), for solid waste management, and Atal Mission Rejuvenation and Urban Transformation (AMRUT), for water security and sewerage coverage, have seen 50 percent and 20 percent reductions in the last year alone.

Sidique also emphasised the need to operationalise accountability and citizen participation provisions to rebuild trust in public institutions, some of which already exist on paper but remain largely dormant. For instance, the 74th Constitutional Amendment proposed ward committees to be the grassroots tier of urban democracy. But in most states, he said, “they either don’t exist or function as rubber stamps”.

“Social audits, which have been successfully employed in rural India under the Mahatma Gandhi National Rural Employment Guarantee Act, particularly in states like Andhra Pradesh and Telangana, need to be adapted and mandated for the delivery of urban services such as water supply, sanitation and waste management,” he added.

Participatory budgeting wherein people have a direct say in how municipal funds are allocated is another step towards citizen participation, which Sidique pointed out had had a good start in Pune in the early 2000s, although it lost momentum due to the lack of political will.

Although new schemes like SMART Cities and Swachh Bharat have introduced digital tools to track the delivery of public services, Sidique said that they remain “top-down in design, rarely translate into genuine downward accountability, and lack grievance redressal platforms”.

This story is republished with permission from IndiaSpend, a data-driven, public-interest journalism non-profit. It has been lightly edited for style and clarity.

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