In an unprecedented move, the UP government has given its nod to offer single-window clearance to real estate projects in the state. This will give a major impetus to the market alongside streamlining the supply and demand side of the real estate cycle.
In general, developers have to seek more than 70 clearances, which take around 1-2 years, thereby severely stretching the construction cycle. Likewise, a tedious process of procuring numerous clearances also undermines the ability of the developer to deliver on time, thereby aggravating the problems of buyers.
There are numerous mandatory permissions for real estate projects that include ownership certificate, building layout approval, non-agriculture permission, numerous NOCs, permission from NHAI, approval from electricity, water, & fire fighting department, commencement certificate, & much more. A permit can typically take anything from 2 weeks to around 3-4 months. Even if there is a delay to the tune of 2/3 days, it can commutatively result in a much larger delay, thereby dampening the overall project delivery.
The process of putting everything under a single-window clearance will simplify the entire process, as everything will be integrated under one roof. As projects will avoid unnecessary delays, it will also help to manage the cost of construction.
Addressing of Developer’s Bottlenecks
During recent years, when RERA finally came out of policy contours, it dawned on a remarkable change in Indian real estate. By setting up the guidelines for real estate development, fund allocation & management, timelines, etc, RERA brought an unprecedented amount of transparency and structure in transactions.
Although it made the developer fraternity accountable, other major stakeholders such as regulatory authorities remained insulated. Consequently, one of the major pain areas for developers, which is getting timely approval, remained unaddressed. This resulted in a lot of challenges for developers as well as delays in the delivery of the project.
It is high time that the authorities are also brought under the purview of RERA so that they can also be held accountable in case of unnecessary delays and other discrepancies.
Fruitful Government Intervention
Government intervention in the form of Single-Window clearance is the need of the hour. It can systematically address the existing loopholes and streamline the overall cycle. It will also cut malpractices such as under-the-table dealings. Timely delivery of projects will also help the developers to improve their credit ratings.
Indian real estate already has been suffering from muted demand on the face of higher unsold inventories & credit crunch for the past 2-3 years. It was pinning all its hope on 2020 for an expected revival. However, to its dismay, the process of revival has been delayed as the COVID-triggered crisis came in.
In such times, a forward push like single-window clearance can go a long way in helping the beleaguered sector. The GOI has already taken some constructive steps such as liquidity injection by slashing repo rates, refinancing of the NBFC sector, credit support to the MSME industry, loan moratorium, etc.
These are mainly focused on general macro-economy and are surely going to help the industry. Besides, there is a pressing need for industry-specific measures that can manage the pain areas of the industry, help in the timely delivery of projects, & support the developers besides boosting demand.
The recent step by the UP government is commendable to bring the entire process of approval under a single-window. Other states should also follow & contribute their part. This will also be aligned with the thrust towards digitization as a single-window clearance will curtail unnecessary human interaction, shorten paper works and speed up the entire process significantly.
(By Ankit Kansal, MD, 360 Realtors)