In the absence of rationalization of approval processes and single window system it is likely that state’s dream of achieving 20 lakh affordable homes by 2020 might go for a toss.
Moreover, the development control rules have elapsed long ago and new set of rules are still awaited despite being policies that are under the time frame of 20 years.The ground reality is that a developers has to take around 54 to 60 approvals and permissions before starting a real estate project. For each approval a developer has to deal with number of government authorities wherein the entire process takes about two to three years resulting in cost overrun and delay of the project.
The uncertainty which looms over getting an approval has not only become unimaginably lengthy and tedious but has also taken its toll on the interest cost which has been increasing for the developers’ as well as the consumers.
The CREDAI body of developers’ fraternity has consistently demanded a streamlined approval system for which action is yet to be seen from the government authorities.
On a pan India basis CREDAI and its members have appealed to the administration to develop an atmosphere which is spirited towards easing of approval systems and smooth functioning of real estate business in the country.
It is often assumed that developers delay projects on purpose to gain some kind of profit, but the fact is that most of the time lose heavily because of approval delays.
Developers make significant investments into land, and the purpose of this investment is not to hold on to it but to develop it. In order to do this, they must even today face a crippling gauntlet of approvals, sanctions and permissions. Until these approvals are obtained, they have to pay the cost of holding the land and keeping their construction materials and workforces on standby, in addition to having to face the ire of their customers.
The fact is that every day of delay costs a developer both financially and in terms of market goodwill and reputation. He is unable to market the units within the project efficiently because of lack of visible progress on site, and can therefore not generate capital to fund his next project. Simultaneously, the government is not able to generate revenue by means of stamp duty and registrations.
The process of obtaining all the necessary approvals, of which there are currently more than 60, often takes as long as two years and sometimes even longer.
The list of permissions or clearances for development of real estate in India varies from state to state. It generally includes but is not limited to the following:
> Land Conversion > Change of Zone for usage of Land > Ownership Certificate > Non-encumbrance > Demarcation Plan
> Tree cutting approval clearance > Bore well registration certificate
> Environmental clearance > Consent to Establishment > Firefighting scheme approval before and aftercompletion of construction
> Site office approval > Consent for operate (for earthquake resistance along with plan approval> Approval related to explosive substances such as gas and petroleum > Other common facilities approvals > Road access > Permission for excavation > Lift-Escalator installation approval > Lift escalator operation license
> NOC for electric substation for every substation transformer within the building
> Clearance certificate for every electrical installation within the building
> Diesel generator sets installation approval > Fitness certificate for diesel generator sets > Swimming pool operation license > NOC for rain harvesting > Damp-proofing certificate > Electricity scheme approval > Infrastructure layout approval
> Sewer connection approval > Water connection approval > Layout approval > Development License
> Commencement certificate > Building completion certificate > Occupancy certificate
The approval system we have today is a hangover of the ‘license raj’ that started in the era of India’s occupation by the British and continued into its independence. The reasons why this system continues are self-evident and do not need to elaborated upon. However, in this era of progressive reforms in almost all business segments, it is high time that the government enacts a single-window clearance system for housing projects.
The provision of such a system will enable residential developers to multiply their output several times over. The increased supply would not only go towards meeting India’s urgent housing needs but also increase revenue for the government. At the same time, the additional supply will increase competitiveness among developers and thereby help keep real estate prices in check.
No doubt, there are a number of provisionsand safeguards that need to be put in place that such a system is not exploited by unscrupulous elements. However, this issue has been already been debated upon extensively by the most qualified experts, and such safeguards have already been isolated and ratified. What remains to be actioned is the provision of single-window clearance for residential projects that qualify for it at the Central as well as State levels. The lack of such a system is a serious impediment not only for the real estate sector in particular but also for the economy in general.