States to Boost Real Estate Projects: Central Government Planning Guidelines..!

To give a boost to real estate and construction sector, the central government plans to issue guidelines for states on streamlining approval procedures for development projects.

The guidelines will incorporate recommendations and key findings of the committee on streamlining approval procedures for real estate projects that was set up by the housing ministry.

The recommendations include creating a compendium of processes & timeline for all central and state approvals to provide clarity on sequential and parallel processes, and reviewing existing procedures & removing redundant steps to simplify the process.

The committee also recommended using an information technology (IT) -enabled single-window approval system, providing special dispensation for affordable housing including a fast-track process for such projects with a 60 day clearance window, and building capacity for private & public sectors.

The panel, chaired by Mr. Dhanendra Kumar, former chairman, Competition Commission of India (CCI), submitted its final report to the ministry of housing & urban poverty alleviation on 15 March, 2013.

Key findings & Recommendations of the report.

“We agree to most of these recommendations and will go forward to put out guidelines for states & local government bodies to streamline real estate project approvals incorporating the key findings of the report” 

Ms. Girija Vyas, Housing and Urban Poverty Alleviation Minister recently, said,  “Some of the recommendations will be used as it is and on others we can further deliberate.”

Long-drawn approval processes for land, water, electricity, town and country planning & other clearances are one of the biggest reasons for delays in the completion of real estate projects.

A typical approval process involving Union government, state government & municipal corporation authorities takes 90 to 600 days, according to the committee’s findings.

According to an estimate by global consultancy McKinsey and Co., delays in approvals have a huge bearing on project costs, amounting to nearly 40 % of the sale value of units.

“Multiplicity of approvals makes the whole process complicated. About 50 approvals are required and it can take up to two years to complete the process. In some cases, by the time one gets one approval, some of the other approvals expire.”

” said Mr. Kumar, who headed the ministry-appointed committee.

According to the committee’s findings, the average time taken for obtaining all the approvals for a residential project in Delhi is 141 days, the fastest among the nine (9) cities considered, while this takes 599 days in Trivandrum, the slowest among the nine.

India ranks 182 among 185 countries in dealing with construction permits, according to a World Bank report titled Doing Business Report 2013.

Another World Bank study estimates that 60 to 80 % of building projects in developing economies are undertaken without proper permits and approvals.

To bring transparency and accountability on the part of developers, the committee recommended measures such as easy access to building approval information & status updates to avoid pre-sales of projects without the requisite approvals.

“Government should demonstrate political will to implement these recommendations. There have been many committees & many such recommendations, but those were never implemented,” said Mr.Lalit Kumar Jain, Chairman,Industry lobby Confederation of Real Estate Developers Association of India (CREDAI).

“The government should take all the states on board and not some select few.”

Mr. Jain, also the chairman of Kumar Urban Development Ltd, said the recommendations, if implemented, will help lower project costs & increase supply in the market, “which will ultimately benefit consumer as they will be able to buy housing units at competitive prices”.

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