The Ministry of Housing and Urban Affairs is expected to propose a focus on the planned development of peri-urban areas to tap into Sixteenth Finance Commission grants. This move aims to discourage haphazard growth and illegal constructions in the outskirts of cities.

To shape its recommendations, the ministry has formed sub-groups to address key areas such as political intervention, administrative reforms, and financial resources. The recommendations will be submitted to the commission, which was formed on December 31, 2023, and is chaired by former Niti Aayog vice chairman Arvind Panagariya. The commission's final report is expected by October 2025, and its recommendations will cover the period from 2026-27 to 2031-32.

The ministry’s focus on peri-urban areas marks a shift from the Fifteenth Finance Commission’s focus on urban reforms in larger cities. "We want to incentivise states to plan urbanisation in peri-urban areas, preventing organic, unstructured growth," a senior official stated.

The Five-member Finance Commission is also expected to recommend strategies for enhancing the revenue of urban local bodies, which will be critical in ensuring sustainable urban development. The Fifteenth Finance Commission had allocated ?1.21 lakh crore for urban bodies between 2021 and 2026, with different grant categories based on city population.

As the ministry looks toward involving planning bodies more effectively, reforms to break down top-heavy state structures will likely be crucial. By incentivising change, officials believe these bodies will be better equipped to address the complexities of urbanisation.