In a blunt message to realty developers complaining about approval delays, industry leader Deepak Parekh has said most of them are reluctant to share information about the affected projects for fear of backlash by local authorities even when the Prime Minister’s Office has sought details to remove the bottlenecks. Recalling a recent meeting he and other business leaders had with Prime Minister Narendra Modi, the eminent banker said, “He (Modi) met with various business heads and asked how things could be improved and as predictable as I am, I mentioned the need for faster building approvals”.
“His office (PMO) followed up after the meeting and requested me to collate a list of specific projects where building approvals were being delayed. “When I reached out to developers to get these details, I was taken aback that most were reluctant to share this information for fear of a backlash by the local authorities,” said Parekh, who heads the country’s biggest financial conglomerate HDFC Group.
Addressing an event of the real estate industry body Credai-MCHI (Confederation of Real Estate Developers’ Associations of India-Maharashtra Chamber of Housing Industry), Parekh said he was raising an uncomfortable issue, but “we do need to be honest with ourselves if we want to see improvements”.
He also said the impasse strengthens the case to have a single window for approvals and therefore there was a need to change the way approvals are given. “World over, architects self-certify that construction has been in accordance with the approved building plans. We can have strict laws which will revoke the licenses of architects if deviations are found,” he said.
Parekh said builders have always complained about inordinate delays and cumbersome processes in obtaining building approvals that result in time and cost overruns and it is the ultimate homebuyer who bears the burden. “When this issue is raised with the local authorities, they say delays are not at their end,” he added. Parekh, known for his outspoken views on policy and corporate matters, also said that the GST (Goods and Services Tax) being levied on under-construction properties is “a pain point” for real estate developers. But, one must appreciate that GST issues are constantly being reviewed and attempts are regularly being made to iron out various issues and this should be the case with GST on real estate as well, he added.
“There has already been a recognition of the need to have a lower GST rate for affordable housing projects. Yet, there remains lack of clarity on input tax credit, abatement of land values and anti-profiteering provisions. “The other issue is that stamp duty and registration charges are not subsumed with the GST. And of course, the proposal to levy a surcharge on stamp duty has got developers worried again,” he said.
Parekh said developers fear the additional surcharge to be a further dampener for a fragile real estate market and an increased burden for homebuyers, but the flip side of the argument is that additional resources are needed in order to generate funds for big ticket infrastructure projects in the city. Stating that both arguments are valid, Parekh favoured a middle-path and suggested steps to make housing more affordable and to improve the ease of doing business.
Parekh maintained that he has never been as optimistic as he is currently as the central government has been at the forefront, having taken several measures to boost the housing sector. Terming the real estate industry as being one of the most resilient sectors, he said most developers would still throw a long list of woes — demonetisation, GST, RERA, rising interest rates, tighter liquidity conditions, slower sales, and stagnant real estate prices. “No doubt, these are challenging times.
The traditional business model of developers has been disrupted and as a result, there is a weeding out process going on where weaker developers will either have to partner with stronger ones to survive or they may eventually have to bow out,” he added. Parekh stressed on the need for real estate companies to adapt to new institutional and structural reforms and said they must remember that any sector or business runs efficiently as long as there is trust. Conversely, there is trouble and red flags get raised when mistrust sets in, he added.
“The flurry of reforms in the real estate sector was to help restore that trust,” he said. Parekh said the current piecemeal approach of seeking approvals at different stages from different authorities needs to change, especially when some processes are “unduly cumbersome”. “With the strides that the government has made on digitisation, integrating these approvals to one platform can be easily done. Once approvals are online, timelines can be transparently monitored. “If affordable housing is the key priority, then why can’t at least approvals for residential affordable housing units be fast tracked?,” he said.