Government to issue guidelines to drive faster approvals in real estate
The government of India is planning to issue certain guidelines to all the states in order to lift up real estate and construction by rationalising the approval procedures for project development.
In this regard, the ministry of housing and urban poverty alleviation has set up a committee which has come up with a set of recommendations and key findings. The same will be incorporated by the ministry to streamline the clearance procedures for real estate projects. The committee, headed by Dhanendra Kumar, who is the former chairman of the Competition Commission of India (CCI), submitted its final report to the housing ministry on 15th March.
The committee has suggested to prepare a compendium of processes involved and timeline for all central and state approvals to provide clarity on the parallel and sequential processes, and reviewing existing procedures and removing inessential steps in order to ease out the process.
An information technology enabled single window approval system that features a special feature for affordable housing is also necessary, said the committee. The single-window approval system should also have a fast-track process for such project – all clearances should be approved within 60-days. It should also include building capacity for public and private sectors.
The housing and urban poverty alleviation minister, Dr. Girija Vyas, said that, most of the recommendations made by the panel have been accepted and the guidelines will shortly be announced for the states and local government bodies to follow. She said that while some of the recommendations will be used as suggested by the committee while the remaining can be used after certain modifications.
Along with delaying the projects, approval delays add up to the cost of projects, totaling it to around 40 percent of the selling price of units, as per the estimate of global consultancy McKinsey and Co.
On an approximate, there are more than 50 clearances that have to be obtained and the process of seeking them is also very complex. Multiplicity of approvals and complexity in the process of seeking all the required approvals itself may take up to two years. In many instances, by the time one approval is obtained, some of the other approvals expire and the developers end up in seeking same clearances more than once.
The panel members comprehended that in getting clearances related to land, electricity, water, town and country planning, etc, long time is involved which is the major factor leading to delays in execution and completion of real estate projects. As per the panel’s findings, a typical approval process of a project involving the Union government, concerned state government and municipal corporation authorities, requires around 90-600 days.
In Delhi, the average time required for getting all clearances for any residential project is 141 days, which is the fastest among all the major cities, while it takes 599 days in Trivandrum, the slowest among the nine cities.
The World Bank has recently come up with a report names ‘Doing Business Report 2013’, which states that India ranks 182 among 185 countries that deal with construction permits. The Bank, in another study, reveals that around 60-80 percent of construction projects in developing economies are taken up without getting all required permits and approvals.
The recommendations of the committee members also aims at bringing in transparency and accountability in the sector. The committee has come up with measures like easy access to building approval information and status updates to avoid pre-sales of projects without getting proper clearances.
CREDAI chairman Lalit Kumar Jain opines that already there are many recommendations made by various committees but the government has to make a decision of implementing them. The government should consider all the states and not just few while taking any measure, he added. If the recommendations are implemented, it would increase supply of housing units in the market along with reducing the cost of projects, and this would further benefit end-users as they can buy house at low prices.
