Transformation of agricultural land into urban areas causes negative impacts on the livelihood of people in rural areas and affects their overall condition. To maintain or increase the opportunities for living and well-being during any disturbance resulting from a development project is called livelihood resilience. This research presents a comprehensive assessment of the effects of urban development-induced displacement and resettlement on the livelihood resilience of rural households. The sustainable livelihood approach (SLA), proposed by the Department for International Development (DFID), has been utilized to achieve these objectives. This research designed a measurement model through a systematic selection of indicators under five livelihood assets. The measurement model was verified by interviewing 348 households and applying a confirmatory factor analysis. Then, through a pairwise comparison of three scenarios of households (already displaced, economically displaced, and to-be-displaced) applying Mann–Whitney U-tests, the study evaluated the livelihood resilience of the households of Atal Nagar-Nava Raipur, Chhattisgarh, India. The findings show variability in physical assets across the scenarios, while there is no significant difference in social assets. The economic assets are significantly different for economically displaced and to-be-displaced households. Moreover, the result also shows that economically displaced households suffer the most, while the already displaced households get accustomed to the situation with time. The research reveals that rather than only providing monetary compensation, intensifying agricultural or farming activities, along with providing various supports for maintaining social and human assets, can better ensure the sustainable development of affected people and the efficacy of urban development projects. Moreover, it highlights the critical role of well-structured resettlement programs in mitigating negative impacts and bolstering livelihood resilience. With a novel methodological approach and the obtained results, this research provides valuable insights for policymakers and urban planners that can help craft urban development strategies that prioritize the welfare of the affected people from rural areas and improve their livelihood resilience.

Urban development, through the transformation of agricultural land, negatively impacts the lives and livelihoods of the people in rural areas. This research endeavors to mitigate the risks by strengthening the livelihood resilience of the households in rural areas impacted by a new city/town development. This research identified four livelihood assets, namely, physical, social, economic, and human, to understand the nature of livelihood resilience. The research reveals that rather than only providing monetary compensation, intensification of agricultural or farming activities, livestock breeding, and accessibility of irrigation facilities are more crucial for people in rural areas. Moreover, the physical infrastructure, although improved after resettlement, may not ensure long-term resilience for displacees and resettlers due to the loss of regular income and employment. In addition, providing necessary information related to displacement and resettlement and various government schemes and assessing and planning by local government, institutions to enhance communication with neighbors and friends are important for making the deprived people resilient.