Short answer: yes, drainage holes are important, but they should not be allowed to drip freely onto your neighbor's balcony. In an urban balcony, the real goal is controlled drainage. Plants need oxygen around their roots, and excess water must be able to escape. If a planter box has no drainage, water collects at the bottom, roots suffocate, rot, and the soil turns sour. So a completely sealed planter is usually a bad idea unless it is designed as a self-watering system with an internal reservoir and overflow.
However, drainage holes alone can create a problem. If your planter sits directly on the balcony floor, water drains out, pools underneath, and may run toward the edge or through cracks. It can drip onto the balcony below, stain surfaces, or cause complaints and even damage. That is especially true after heavy rain or if you overwater.
The practical solution is to keep the drainage holes but manage the water. Set the planter on a sturdy drip tray or saucer with enough depth to hold overflow. For larger boxes, use a waterproof liner and a hidden catchment tray. Check the tray after watering and after storms, and empty it before it overflows. You can also raise the planter on feet inside the tray so the bottom does not sit in standing water.
Another good option is a self-watering planter. It has a reservoir below the soil, and the drainage/overflow system is contained. The plant wicks up moisture as needed, and excess water can be drained from a plug or overflow hole into a container. This reduces both root rot and mess.
If you have a built-in or custom planter, make sure the balcony floor and walls are protected. Use a waterproof membrane, slope the internal base toward a controlled drain, and connect that drain to a reservoir or approved drainage point. Do not drill through the balcony slab or rely on a random hole. In many buildings, modifying drainage or causing water to reach a neighbor can violate HOA rules, lease terms, or local codes. If water damage occurs, you may be responsible.
Other tips: choose plants that suit your climate and do not need constant soaking; water slowly and stop when runoff appears; use a moisture meter; add a layer of mulch to reduce evaporation; and avoid leaving a hose running. In winter, empty trays so ice does not crack them or block drainage.
So: yes, use drainage holes—or a well-designed self-watering system—but never let them drain directly onto the balcony below. With a tray, reservoir, or contained overflow, you can keep roots healthy and keep the peace with your neighbor.