Developers’ counter view on project delays
Gaurav Kapoor booked a flat in one of the newly launched projects of Delhi-NCR in early 2007. He was promised the flat would be ready for possession within three years with a grace period of six months. To play safe Gaurav even opted for a construction linked payment plan to the developer but six years have gone and he is yet to get his flat and every time he has approached the developer, various reasons for delay have been cited from macro economic conditions to funding woes and approval delays on part of the government agencies.
When Track2Realty approached the developer, he had his own share of woes and list of approval processes being delayed which would have been a matter of few weeks in normal course of time.
The policy makers seem to be determined, at least on the face value, to reform the real estate sector and create a level playing field for the buyers. The intent no doubt is good with the Real Estate Regulator Bill but in this reforms process certain grey zones have not been addressed that could have a far reaching implication on the timely completion of the project.
Developers maintain obtaining approvals is quite a tedious and cumbersome process and they are required to obtain more than 50 approvals to build a project. The process usually starts with Ownership Certificate, which should ideally take 15 days to acquire. However, this ends up taking few months.
The EIA clearance, Aviation and Archaeological Clearance may take 1 to 3 years. Then comes approval for building layout, which again takes an inordinately long time. The process of getting building permit from the Building Proposal Office should ideally take 30 to 45 days, but it sometimes extends up to six to 12months.
Afterwards, it is Non Agriculture permission, followed by “N” number of NOCs from Tree Authority, Storm Water and Drain Department, Sewerage Department, Electric Department, Traffic and Coordination Department, NOC from Chief Fire Officer, etc. Another important step is obtaining Environment Clearances. Delay in obtaining Environment Clearance has become a major deterrent for developers.
Although the government has issued a circular to clear such projects in a time bound manner, it takes more than 17-18 months to obtain environmental approvals. Apart from this, a developer has to obtain approvals for Water Connection, Permanent Sewerage Connection, etc.
Lalit Kumar Jain, Chairman of Kumar Urban Development feels it is often not even discussed that the developers reel under the ‘NOC regime’ and not ‘Approvals’ that can be revoked at the will of authorities. Revocation of stopping development at the behest of some local bodies is a reality. But currently, developers are more concerned about the unduly long approval process as the entire real estate spectrum, from developers to end-consumers, is suffering major losses from it.
“Yes, we are at mercy of authorities as far as NOCs are concerned. These officials have the power to revoke NOCs at will. And, in a way, this is also breeding corruption in the system. We need to root out all the irregularities that plague the real estate sector from flourishing. Obtaining the innumerable clearances is an issue which has been festering since a long time. It is high time we take appropriate measures to speed up the process of obtaining approvals,” says Jain.
Mohit Goel, CEO of Omaxe blames delay in project execution is substantially and mostly on account of frequent external factors that has its repercussion on delays perceived to be due to internal factors. Internal factors per se may be sporadic and very few during a project cycle. For instance, delay in getting approval leads to unintentional straying from planned project development cycle. Interrupted external factors lead to discontinuity in planned production cycle, fund blockage and cost escalation.
“Before launching a project, builders are supposed to take various approvals. While on one hand, a major chunk of the developers’ money is blocked in the land cost incurred by him, any delay would result in cost escalation to the end-user. Further, various approvals have different validity. By the time one approval comes, the other NOC/approval expires; the renewal of which further adds to the delay for developers and buyers,” says Goel.
Diipesh Bhagtani, Executive Director, Jaycee Homes also asserts no developer likes to delay the project purposely. The cost of construction escalates in terms of inflation, increased labour cost, interest on loan, maintenance of the structure or land if the project is delayed. Biggest of all the brand equity and trust of the developer is affected. There is great amount of monetary and nonmonetary losses incurred by the developer if the project is delayed for whatever reason. Hence the delay in project is seldom due to internal dynamics.
“The entire process of getting permission is tedious and complicated. A developer has a separate team of people working on procuring permission from various departments. The toughest is the permission to start work. Single window clearance is a distant dream and running from pillar to post for approvals takes away most of the time of the developer,” says Bhagtani.
Developers have been pitching for a single window clearance from a long time. They maintain if the government really wishes to reduce cost of housing then the only solution is single window clearance for all real estate Projects. They believe single window clearance is the only solution to this mess of obtaining multiple of approvals that too from different government departments.
Online approvals and single window clearances are the need of the hour as this will significantly reduce time taken to complete projects. It will also reduce red-tapism, which has been a huge obstacle to clear approvals on time.
The developers believe this system will see a rise in consumer satisfaction and speedy approvals, resulting in sale price reduction of about 10-25 per cent as it has the potential to not only speed up the time taken to complete projects, but also reduce project costs, thereby bringing in some sanity in these times of uncertainties in the market.
