Some 130 miles southeast of Mumbai lies a city you would instead expect to find on the Mediterranean coast. Modelled on the Italian resort of Portofino, with its colourful cottages, cobbled streets, and pristine green slopes, Lavasa is a stark contrast to the roaring, chaotic cities India is notorious for. It claims to be the country’s most sustainable city — and its 2,000 residents can testify to this.
But Lavasa is unique not only due to its relaxed vibe and award-winning master plan — the city is also completely private. From water and electricity supply to schools and hospitals, all public services here are provided privately. Lavasa, however, is not one of India’s gated communities with gloomy guards and private patios. A lion’s share of its residents are former villagers who now work for Lavasa while their children go to an English-speaking nursery free of pay. When Lavasa, in 2011, became a target for an ideologically-driven attack, those former villagers stood up to defend ‘their paradise’.
Who will build the roads — and clean the slums?
Getting cities right is a universal challenge, but for rapidly urbanising countries like India, it is particularly dire. Extreme density paired with poor infrastructure creates all sorts of urban plagues, from severe road congestion and notorious levels of air pollution to slums, poverty, and crime. Every minute, 25-30 Indians move from a rural area to a city. If the skyrocketing demand is not met with adequate supply, the situation may spiral out of control (this is already happening in Mumbai, where more than half of the population lives in slums, or the capital city of New Delhi, officially the world’s most polluted city).
Top-down remedies, like the nationwide US$12 billion Smart Cities Mission, have shown unimpressive results. Another approach, which looks promising, is outsourcing development to the private sector. The 2005 Special Economic Zone Act, along with a range of regional-level reforms, have opened multiple windows of opportunity, and some developers have gradually moved from delivering houses to creating entire cities.
The classic example of that is Gurgaon, a satellite city southwest of Delhi. Relaxed land acquisition rules, along with the absence of the municipal government, allowed several corporations (including Maruti Suzuki and General Electric) to jointly build a self-governing city. With a population of over one million, Gurgaon is a major financial and industrial hub, a city with the third-highest income per capita and the highest Human Development Index in the country. That said, Gurgaon may not be the most pleasant place to live. It is infamous for its chaotic and unevenly provided urban infrastructure such as water, electricity, and sewage — a result of the city’s fragmentation between multiple private landowners.
But what if the whole city could be designed, build, managed, and governed by the same company — could it repeat Gurgaon’s impressive economic success while avoiding its pitfalls? For Ajit Gulabchand, head of the 100-year-old Hindustan Construction Company, the question was beyond rhetorical: he dreamt of creating a replicable model for future cities — and empowering millions of Indians “by allowing them to govern themselves”. When the state of Maharashtra passed the ‘Hill Station’ act, waiving land-ceiling and zoning laws for certain areas and giving developers substantial tax exemptions, he saw it as a chance to try out his vision.
Good parks and good governance: How Lavasa makes money
To most Indians, the Hindustan Construction Company was known for mega-projects such as highways and dams. In 2009 however, they were aiming for something completely different: a brand-new city. A city with walkable neighbourhoods, vast green areas, and a strong sense of community that would attract 240,000 residents, create 80,000 jobs, and lure in two million tourists each year.
The master plan by HOK, a globally renowned architecture bureau, reflected the principles of New Urbanism and received international acclaim. A former Mumbai Metropolitan Authority planner was hired to implement it — after forty years of public service, he admitted to enjoying more creative freedom than ever before while building Lavasa. The mayor’s role was played by the City Manager. Scot Wrighton, a seasoned academic and practitioner with experience in managing several U.S. cities, was hired for this role.
A private city, like any private business, must have a sustainable business model. Lavasa’s one relied on three revenue streams: selling homes, charging service fees, and leasing non-residential spaces to retail, commercial, recreational and other uses. But what the city of Lavasa was offering was beyond real estate alone. The main product was not the master plan or the world-class facilities — it was the city’s unique governance model enabled by its Special Planning Authority status. Among other perks, it allowed the city to sell and lease land without seeking the government’s permission.
In Lavasa, private firms not only maintained public spaces like parks and roads and provided electricity and water supply but also ran schools and hospitals and other traditionally state-operated services — practically everything apart from post offices and police stations. What’s more, many services were offered free of pay, including potable water, garbage recycling, primary healthcare and ambulance, an English-speaking nursery and school, and varied professional training courses. But most importantly, Lavasa offered employment to low-skilled workers, both local villagers and those coming from other places.
In order to attract the critical mass of residents, the city partnered with several educational institutions such as Ecole Hôtelière de Lausanne and the Bangalore-based Christ University. Another anchor tenant, Ashiana Senior Living, became home to dozens of retired Indians. Film director and former World Bank environment consultant Suresh K. Goswami, after having lived in many places from London to Nigeria, felt the desire to retire in India but no city felt hospitable enough — until he found Lavasa. After ten years of living there, he considers it “the first and most beautiful smart city in India”.
The battle to save Lavasa
The one-of-a-kind private city captured public attention as soon as the project was unveiled in 2002. By 2010, the first phase was almost completed and the population had surpassed 10,000 people. At that time, Lavasa was a living community, a real estate hotspot, and a tourism hub. All of that came under threat when the development was abruptly frozen following a political campaign. The fight against Lavasa was led by the left-wing National Alliance of People’s Movement which saw Special Economic Zones (“special exploitation zones” is their preferred term) as an embodiment of everything they stood against. Through street protests, legal complaints, and media activism, they managed to stall the project on environmental grounds.
That would be a typical NIMBY story if not for what happened next. The court decision was met with counter-protests by locals, including elected representatives of all the 18 villages comprising Lavasa. In the Bombay High Court, they testified that Lavasa benefited the environment — not least through planting 600,000 new trees — and generally made their lives better. “When Lavasa came, our lives improved”, explained an ex-farmer. Another one complained that the media listened to a small group of activists with no skin in the game, while a thousand local families remained unheard. Killing the project, they feared, would take their source of income and doom their chances of getting out of poverty.
A year later, Lavasa got environmental clearance and the construction was resumed. However, a critical number of investors had dropped out by then. For the next decade that the project was in limbo, Lavasa residents refused to give up trying to revive the city. The online petition to “save Lavasa” on Change.org has gained almost 24,000 signatures. In 2021, the first glimpses of hope appeared when a deal was finally reached between a new investor, Darwin Platform Infrastructure Ltd., and a group of creditors. The new investor promptly assured that they had “an ambitious and long-term plan for Lavasa Smart City”.
The story of Lavasa is an unfinished one. On the one hand, it demonstrates the evident demand for innovative urban solutions in rapidly urbanising countries like India. On the other hand, it highlights pervasive institutional hurdles faced by visionaries who come up with such unconventional proposals. Above all, it is a story of thousands of Indians whose lives were improved by Lavasa — and who, against all odds, won the battle for their ‘paradise’, as one of my respondents called it. The interest of both investors and potential residents is a clear indication that the city-as-a-service concept — a city where the governance model is as essential a part of the bundle as the physical infrastructure — has a future in India and other fast-growing economies.
This article is based on “A Tale of One City. Lavasa as a Coasian Prototype of a Private Urban Development”, a chapter in Institutions and Incentives in Public Policy: An Analytical Assessment of Non-Market Decision-Making (Rowman & Littlefield, 2022).