BW Businessworld

Can ‘Housing For All’ Bounce Over The ‘Red Tapism’ Barrier?

Having multiple people or committees to approve a decision and various low-level rules have made conducting affairs either slower, more difficult, or both.

Having multiple people or committees to approve a decision and various low-level rules have made conducting affairs either slower, more difficult, or both.

 The slogan for Indian socialism has been ‘food, clothing & shelter’ and it continues to be the basic necessity of humanity. In 1960’s when the nation faced food scarcity, green revolution through high yielding variety seeds helped us create sufficient food supply. The need of textile (clothes) is also somehow manageable, but the area where we lagged was 'shelter'.

 In India, there are millions without homes of their own. Many governments have come up with housing schemes but the problem still persists in a big way. Indian Prime Minister Narendra Modi came up with a similar mission of ‘Housing for All by 2022’ to be achieved through various schemes and line of actions. In alignment with this housing target, Maharashtra state government took pro-active steps and flagged off a couple of initiatives to achieve the target of lakh houses in the state by 2019.

Manju Yagnik, Vice Chairperson, Nahar Group, a real estate developer headquartered in Mumbai told BW Businessworld, “To achieve the target set out by the chief minister, it is crucial that the commitment of speeding up the approval process is adhered to. Having limited land parcels in the city, there is a dire need for vertical expansion which will happen with floor space index (FSI) ratios being doubled. Right policies, financial funding and participation from private developers will definitely give the push”

 However, Indian bureaucracy has always been a big hurdle in implementing government initiatives. Having multiple people or committees to approve a decision and various low-level rules has made conducting affairs either slower, more difficult, or both.

“While RERA covers the developers and buyers, there is dire need of transparency at the approval authority end. In the current scenario, projects take even three years at times for getting all approvals, which can push up the costs phenomenally. A single-window clearance can help faster approvals and curtail red tape to a great extent,” added Yagnik.

Niranjan Hiranandani, President, NAREDCO West and CMD Hiranandani Communities told BW Businessworld, “RERA has brought in a structured system for real estate developers to follow while planning for a project. It creates a transparent and disciplined system of planning and implementing a housing project. It also lays down the deadlines and time-limits, from the perspective of what the real estate developer has to follow vis-à-vis the home buyer. What is needed now is the step prior to this – which is all about time-bound clearances and permissions from officials.”

 A housing projects need permissions and clearances from a various government authorities, be it the Central and State Governments, the local self-body, Environment Clearance, Civil Aviation permissions for height restrictions – it is a complicated system where different authorities have not just different ways of working, but also different timelines to complete all aspects related to a file. A study released this year by Assocham (the Associated Chambers of Commerce & Industry in India) revealed that 826 housing projects are running behind schedule across 14 states as of December 2016. All these projects have passed the launch stage. The study suggests that the average delay is 39 months in Maharashtra, 48 months in Punjab and 31 months in Karnataka. “What India needs is a centralized system which includes all authorities, covers all permissions and clearances in a timely manner. If the time-bound clearance does not happen, despite the file having been put up with proper details, then we need a system to shift the responsibility which at present, fall squarely on the real estate developer, and apportion the time-lag or delay to the concerned officials who cause the delay,” added Hiranandani.

 Almost every new scheme gets stalled due to red tapism and eventually, this kills the larger objective for which the scheme was launched. This is the reason as to why we see many new schemes being launched by every government but somehow, they fail to achieve their aim. Thus, in order to meet this target, the state government in sync with the developer’s fraternity has to relook various courses of actions to be streamlined and modified.

Hiranandani suggests two steps through which Maharashtra can achieve its ambitious target. One step is easing the tax duties and the other being the public private partnership (PPP) model:-

 a) Tax relief – Introduction of goods and services tax (GST) was aimed to make the industry tax neutral and bring in uniformity in the tax pattern, hasn’t worked for the housing sector. Central government has pegged GST on ‘under construction real estate’ at 18 per cent, which is applicable to only two –third rate making it at 12 per cent. Also, according to developers, 33 per cent mandatory abatement towards land is not enough as this will not give substantial gains to the projects. To expedite the extensive growth of the industry which is the second largest contributor to the nation’s GDP and also leads in labour-intensive job creation, the developers urge government to consider providing mechanism for reducing the value of land. As land remains the state issue there are various local municipal taxes levied like stamp duty on the purchase of a house. Thus, in a nutshell, the imposition of GST has caused an inflationary impact on affordable housing by 3.5 per cent and five per cent on luxury housing segment which is detrimental to the industry growth. Therefore, it is imperative for the government to revise the tax structure making it industry friendly and growth centric.

b) PPP model -It will be a Herculean task for the state government to develop the quantum of housing required to achieve the set target in isolation. Therefore, the 'PPP' model can be an apt way of achieving this mission. At the primary level, government owned land like port land, mill land, salt pan land can be the ideal platform to create such affordable homes, as land prices have skyrocketed in the cities. Developers face a major challenge in land acquisition process which needs to be simplified for making the land available to build affordable housing. At the secondary level, achieving this mission will also require further improving the ‘ease of doing business’ initiative of the Maharashtra Chief Minister. The number of approvals required has gone down, now we need to focus on reducing the time taken to clear the files with applications for permissions. Creation of an online system to apply for and get permissions and clearances can do away with the human interface effectively, thereby, reducing gestation period. As per NAREDCO’s perspective a single window, time-bound clearance, and accountability are the major highlights to augment housing surplus even in the highly urbanised cities like Mumbai.

The Real Estate (Development and Regulation) Act, 2016 can help sort this plague if we succeed in creating single-window clearance for real-estate. Summing up, red tapism can be curtailed if accountability and transparency, the manner in which it is applicable to real estate developers and house buyers, is also extended to the officials who do not clear files within the stipulated time.

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goods and services tax naredco narendra modi

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