Monday 1 December 2014

What’s causing the delay in single-window clearances?

If the new government actually provides hassle-free approvals to housing projects, residential prices can come down by 30% to 35%.

The Indian real estate market is in dire need of single-window clearances for residential projects, and this is something that the new government must action on a priority basis. The process of project approval must be revised so that developers can launch more projects and increase supply, which will help in keeping prices down. Owing to its specific structure, the current system is completely counter-productive. The lack of a streamlined projects approval mechanism is a symptom of India’s retrograde bureaucratic machinery which causes untold losses to all stakeholders.


It is a well-known fact that real estate is one of the major contributors to GDP, and this sector cannot perform optimally in a scenario where a bewildering multitude of agencies are involved in processing approvals for real estate projects.

If we study the massive numbers of clearances and approvals that are required for residential projects in India, the challenges that developers have to face become very apparent. The old English proverb ‘there’s many a slip between the cup and the lip’ is very apt here. The extensive efforts that a developer in India has to put in before a project is even approved for construction are not well understood.

Moreover, the procedural complications only increase once a project is cleared for development. A project can face a road block at any stage between construction commencement and completion because of some government department or the other delaying clearance or approval.

Developers face multiple repercussions because of these delays. In the first place, delays adversely affect the gestation period in terms of returns. Secondly, delivery timelines play a big role in determining the attractiveness of a project in relation to investors. The amount of confidence that end users place on a developer is directly proportionate to the pace of delivery.

Now expectations are big on the present government, which has assured the Indian real estate fraternity that it will pay due attention to its issues.

Prime Minister Narendra Modi has made it his mission to make housing affordable to all, but it is difficult to see how this can happen when the currently employed multi-agency approach to project approvals adds as much as 40% to the cost of constructing projects.

If the new government indeed provides single-window approval to housing projects, residential prices can come down by 30% to 35% as a result, says a real estate expert.

The introduction of a single-window housing project approval system would make it possible for residential developers to increase the supply of housing, which would not only help in addressing the country’s massive requirement for housing but also increase the government’s revenue collections from increased stamp duty and registrations.

Also, increased housing supply will mean healthier competition among developers, which will result in more rational and uniform pricing. Greater competition will also boost innovation in project designs.

These considerations combine to make a very compelling case for the government to finally make single-window approvals for housing a reality.

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