An average real estate project from launch to possession takes about five to six years. There is usually a grace period of six to12 months. Yet at times there is further delay in possession of property.
Although details vary from state to state, a real estate builder/developer currently has to apply to 40 to 50 central, state and local departments for approval for a single project. The whole process takes about three to five years.
During this period, the cost of construction rises and so does the cost of homes. According to a 2010 report submitted to the Indian government by the McKinsey Global Institute, titled India’s Urban Awakening, approvals account for 40% of a project’s sale value.
Most authorities are not bound by any time limit and take up to three years to grant an approval or no-objection certificate (NOC) to a project. Clearance from certain authorities, such as the National Monuments Authority, Archeological Survey of India and Airports Authority of India could be avoided by clear demarcation of restricted and non-restricted areas.
The urban population is projected to rise from 31.2% of India’s population in 2011 to 40% by 2030. There is an urgent need to meet the rising demand by speeding up the supply. Environmental clearances for affordable housing projects for the economically weaker section/low income group segment should be given special treatment.
The Real Estate (Development & Regulation) Bill, which has been cleared by the cabinet, aims to bring transparency and accountability to the sector and to protect consumers. The bill would prevent promoters from launching a project until all of the required licences and approvals are in place. The bill provides for control over the developers but not over the sanctioning authorities, which would continue to operate without any time commitments.
Instead of the much needed single-window clearance, the bill would establish a Real Estate Regulatory Authority – another addition to the list of authorities to which a promoter must apply. To meet the new law’s objectives, it should cover all stakeholders.
More importantly, the approval process needs to be streamlined. This could be accomplished by a technologically equipped and competent central single window facilitation committee, with a presence in all states. Approving authorities can also take steps to speed up the approval process, and ultimately the delivery of houses.
(1) Automating the building plan approval process would reduce paperwork, physical visits, human error, ambiguity, and the time taken in scrutinizing plans. This could be achieved through the websites of urban local bodies (ULBs), where building plans would be submitted in electronic format for scrutiny. Specially designed software could automatically check the building plan against building bye-laws and give the results. Online payment of the scrutiny fee on the same website would reduce corrupt practices.
(2) Bye-laws of ULBs could be standardized, updated and uploaded on the ULBs’ websites. States may also consider directing ULBs to put in place a dedicated cell to act as single facilitation or clearance window.
(3) Consolidation and simplification of building bye-laws is needed to provide clear laws and guidelines. This could involve bringing together provisions under legislation governing several authorities. The resulting laws and guidelines could be publicized and made available on the websites of the authorities concerned.
(4) Approving authorities should be brought under strict time constraints for granting or refusing approval of a real estate project. If an authority fails to comply with a time constraint, the application to the authority should be deemed to be approved.
(5) With a flexible approach towards developers, an approving authority may be able to speed up the approval process. For example, approval for a project development plan could be granted without insisting on prior development of internal infrastructure, subject to an undertaking from the developer that the internal infrastructure will be completed before applying for an occupation certificate.
(6) The norm is that an environmental impact assessment (EIA) is carried for each project. This takes up to 90 days. To simplify, an EIA could be carried out when the master plan of an area is developed. The department concerned could publicize the guidelines to be followed for different types of projects and put the guidelines on its website. Responsibility for compliance could be left to the developers, and for enforcement and monitoring to the project approving authority.
(7) Online registration for selected clearances should be introduced.
The real estate sector is important. It accounted for 5% of India’s GDP in 2011-12. Restrictions and hurdles are slowing its growth. By bringing in transparency and updating rules and procedures, this sector can be given the opportunity of soon becoming one of the largest and most successful in the nation.
Amitabh Chaturvedi is the managing partner of Mine & Young, where Utkarsh Tewari is a partner.
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