Within the built environment of Mumbai real estate there is hardly any two views as far as the need to have online approval is concerned.
The debate today is more about the cost & benefit analysis of the announcement of Maharashtra Government to opt for electronic approvals at urban bodies across the state. With this announcement by Chief Minister Devendra Fadnavis the decks have been cleared for the online approvals across all urban bodies including municipal corporations and municipal councils.
It normally takes no less than a year’s time to get the approvals. The developers have often complained that it not only delays the project but also the delays often take the project out of their hands in terms of its financial viability.
There is hence a growing discussion as to what extent will the online approvals help the sector battling a negative public perception due to project delivery. More importantly, the analysts are also arguing whether the move will help in reducing the cost of construction and reduce the property prices.
Industry upbeat
Calling it a very optimistic decision that will smoothen overall working culture, Devang Trivedi, Managing Director of Progressive Group says this is the only way it has to be done.
“It will certainly help in the long run. There will be teething problems in initial period but later it will smoothen up. It will also remove corrupt officers from the front as the clearances will take time no to move across tables as there will be less human interface,” says Trivedi.
Raj Gala Shah, Partner, Zara Habitats says that electronic approval is the need of the hour and is a very common practice in all rapidly growing countries. It is a very realistic and practical initiative by the government. But he maintains that the method of implementation is equally important as the intent itself. The switch in the system to electronic approval needs to be backed up by robust and latest technology in terms of hardware, software and Internet connectivity.
“One of the major costs incurred by the developer and passed on to the consumer is ‘interest cost’, which is due to red-tapism and old school approval processes. Electronic approvals will eliminate red tapism, end irregularities and violations, and ensure time bound approvals, thereby reducing interest cost overruns and directly bringing down the cost of real estate,” says Shah.
Will it reduce prices?
Rohit Gera, Managing Director of Gera Developments does not feel online approvals can cut down the property prices. According to him, it will definitely help the sector but is not linked to pricing index of the property.
“Online clearances will definitely help the sector in timely delivery of the projects but to assume that it will reduce the property prices is too far fetched,” says Gera.
However, the majority view is that the adoption of the electronic approval route would go a long way in increasing supply and thereby also keeping property rates rational. There is nevertheless one accompanying concern to faster housing project approvals – support infrastructure deployment – because infrastructure is extremely important in making real estate viable in newly developing areas.
Arvind Jain, Managing Director, Pride Group adds that there has been a long-standing demand to the government by the developer community to make real estate more friendly for builders as well as buyers. Quicker approvals for residential projects, especially in the affordable and mid-income housing segments, via electronic approvals make very professional sense.
“It should be borne in mind that approval delays cause capital-intensive overheads which finally reflect on the price that end users pay for their homes. Electronic approval can unclog the housing pipeline and especially benefit the affordable housing sector,” says Jain.
Freedom from red tape
An overtly critical Kishor Pate, CMD, Amit Enterprises Housing says the lack of a streamlined projects approval mechanism is a symptom of India’s retrograde bureaucratic machinery which causes untold losses to all stakeholders. The ill effects are most visibly seen in Maharashtra, where the various constraints on real estate development have in fact played a big role reducing the pace of state-level growth.
The real estate sector cannot perform optimally in a scenario where a bewildering multitude of agencies are involved in processing approvals for real estate projects. Electronic approval for commencement of a project is a decisive step towards unraveling the complexity,” says Pate.
These are initial days of the announcement and the modalities of online approval are yet to be rolled out. The real estate developers are therefore into cost & benefit analysis based on just the intent of the Maharashtra Government to opt for online clearances. But, as they say, the devil lies in the detailing and that is yet awaited.
What all will fall into online clearances is a big question today. Whether all the clearances will be online is a big question today. After all, the procedural complications often do not end with the mere clearance of a project, which can get road blocked at any stage between construction commencement and completion because one or the other clearance or approval is being delayed by some government department or the other.
The developers are hence demanding that the government should ensure that all required approvals to see a project to completion, not just to commence construction, could also be obtained electronically. More importantly, the government must ensure that the state upgrades to its mechanism for granting online approvals. Failing this, the good intent of online approvals might end up into another symbolic gesture on part of the government.
Quick facts
- Maharashtra among the two states to move towards online clearance; Haryana the other
- Online approval will reduce construction time and hence may affect the prices on account of developers’ borrowing cost
- It is not clear whether all the clearance will be online or only the select set of approvals
- There is a big question mark over government readiness for online approvals in terms of technology enablers
