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An outcome of urban growth is concentration of population and businesses. As the population of an urban area increases, so do diverse concerns and problems including issues of servicing large number of people with existing, limited resources. Environmental problems, particularly pollution and water scarcity, have become more prominent and worrisome in recent times and are central issues for urban planners and decision makers. To address these complex problems, practical approaches that incorporate the concept of carrying capacity into managing urban development are needed. This paper presents a system dynamics (SD) model highlighting the drivers of urbanization, its impact on carrying capacity, and the consequent multiple feedbacks that impacts urbanization's growth.