The biggest challenge for the 100 smart cities, for which the central and state governments would be disbursing Rs 100 crore each along with funding from the urban local bodies (ULBs) and private partners, would be raising finances for the projects since most corporation bodies do not have the capability to raise finances on their own strength.

"The government will only act as a facilitator but it would have to come out with a viable business model for the project to woo investments from both Indian and overseas investors," said Neeraj Bansal, India head – real estate and construction sector – KPMG.

He said the government could draw a parallel between the way greenfield and existing airports have been successfully developed under the public-private-partnership (PPP) model and smart cities projects.

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A report released by Deloitte estimates an investment of between Rs 75,000 crore and Rs1.5 lakh crore for a greenfield smart city with a population of 5-10 lakh. It said the project could take 8-10 years to complete.

The Deloitte research note raised concerns over financial losses of ULBs mounting if tariff rates were not fixed at levels that could ensure recovery of costs.