Developers anguished at project delays beyond their control

Project delays in general is a matter of grave concern for buyers who have invested their hard earned money in the hope of owning their dream home within a stipulated time. However, developers have come out into the open to express their anguish at being hassled due to delays that are beyond their control. Delays have been caused due to various reasons ranging from macro-economic conditions, delays in clearances and approvals from various government authorities as well as funding restrictions. Such delays not only affect the project under consideration but also the developer’s future projects, thereby resulting in a funding gap as well as project mismanagement. As a result, the image of the developer is tarnished among buyers who have invested in its projects.

Clearances and approvals cause maximum delays

One of the common reasons cited by most developers for projects delays that are beyond their control are clearances and approvals from government authorities with issues related to land acquisition as well as environment issues, among others . Incidentally, a developer of a residential project has to obtain as many as 50 approvals to construct a project. A process that in the normal course of affairs should only take a few weeks to about a couple of months, drags on indefinitely due to inordinate delays on the part of government authorities.

Environment clearances and building approvals

As revealed by most developers, the toughest of the approvals required is the permission to start work which hinders the progress of construction from the very onset. Obtaining a land ownership certificate which should ideally take about 15-20 days, ends up taking about a few months to acquire. Besides, EIA (Environment Impact Assessment) clearance as well as the aviation and archaeological clearance takes anywhere between 1-3 years to obtain. Also, the approval for building layout as well as the process of obtaining a building permit from the building proposal office which should ideally take about 30-45 days, in reality takes about 6-12 months to acquire.

NOCs

Other approvals include non-agriculture permission as well as various NOCs (Non-Objection certificates) that are required from authorities like the Tree authority, Storm water and drain department, Sewerage department, Electric department, Traffic and co-ordination department and the Chief Fire officer, among others. Environment clearances lead to further delays taking about 18-20 months to obtain environment approvals.

Other approvals

Other approvals include those for water connection and for permanent sewerage connection. At present developers are at the mercy of government authorities as far as NOCs are concerned as they have the power to revoke NOCs at their own discretion which indirectly breeds corruption. There have been many instances when revocation of NOCs or hindering the sanction of approvals are done at the behest of local authorities and politicians.

Funding issues

Besides, funding issues also hamper the progress of many projects due to banks curbing the issuance of funds to the real estate sector. This has forced many developers to resort to other options like funds from NBFCs as well as PE funds, which charge a higher interest rate ranging from 16-24 per cent. This causes a serious imbalance in the financial obligations of developers for his current as well as future project commitments.

Remedial action required

·  Introduction of standard guidelines by the central government with regards to building rules that need to be passed on to the state governments that need to be implemented strictly in the respective states

·  Single window clearance and online approvals with regards to multiple approvals from different government departments thereby reducing red-tapism and corruption

·  Introduction of the Real Estate Regulatory Bill in Parliament which will bring in more discipline among developers with regards to completion of projects

·  Removal of legal as well as socio-political impediments which hamper the progress of projects

·  Removal of RBI restrictions with regards to easing bank funds to the real estate sector so that developers don’t have the burden of availing funds at higher interest rates from external sources