Thursday, July 23, 2009

Realty sector: Tangled up in red tape

Realty sector: Tangled up in red tape
Realty sector: Tangled up in red tape

Y Maheswara Reddy
First Published : 11 Jul 2009 09:44:03 AM IST
Last Updated : 11 Jul 2009 09:58:41 AM IST

BANGALORE: While not many builders have plans to announce new housing projects, the irritating, at times unbearable, delay in getting permission from the statutory bodies can bog down the real estate segment which has already received a body blow from the economic slowdown.

Bangalore is a favoured destination for real estate developers but the lengthy procedures often puts them off, given the red tape or corrupt practices that prevail at government offices. Construction of a housing project can begin only when the builders have approvals from all the government bodies. The builders have to take permission from Bharat Sanchar Nigam Limited, Airport Authority of India of Bangalore and New Delhi, Bangalore Electricity Supply Company, Bangalore Water Supply & Sewerage Board, Karnataka State Pollution Control Board, Fire and Emergency Services (if the proposed building is above 15 meters), Bangalore Development Authority, State Environment Assessment Committee and Bruhat Bangalore Mahanagara Palike.

The builders are expected to get clearance from each government department within two months but no official cooperates with them. “A builder has to wait for more than a year to get approvals from all these statutory bodies before the start on the construction work,’’ says Suresh Hari, secretary, Confederation of Real Estate Developers’ Association of Karnataka.

Normally a builder promises his customers about completing the project within a stipulated time, but most of the builders end up delaying the completion of the project. Consequently customers run down the builders for not honouring the commitment. “The delay in completion of a housing project is certainly an embarrassment for the builder and a loss of face, while completion of a housing project on time adds to the value for the future projects of the builder,’’ says a builder in Malleswaram under the condition of anonymity.

This delay in availing approvals has a huge effect on the project cost if the raw material price has increased during the extended time (the gap between the stipulated time for the completion of the project and the time extended to complete the project due to delay in getting approvals).

“Buyers will have their own problems.

It is not their fault to expect the housing project to be completed on time. But, builders are helpless in most of the instances due to the delay in availing approvals from various government departments,’’ laments another builder.

A few years ago, the state government had announced a single window policy to attract IT majors to Karnataka. Those days the IT companies used to get clearance through the single window system.

Many builders also want the government to introduce the single window system for the real estate sector. “We had already requested the officials concerned to introduce the single window system for the real estate segment. I am not able to understand why the government is not taking a decision,’’ says Hari.

Emphasising the need of the single window system, Bhaskar Reddy , director, Residential Services, Assetz Property, says that the present system in place requires the developer to approach at least six different approving agencies.

“This process roughly consumes about 12-18 months and things become really difficult if one among these agencies decides to play truant,’’ he adds.

The increase in the project cost gets passed on to the buyers. No builder is ready to bear such additional costs.

Amit Bagaharia , chairman & CEO, Asipac Group, opines that speeding up the approval process will help as it lowers the interest cost of developers.“Cities like Pune and Kolkata have a maximum time limit for building plan approvals by these municipal authorities. Bengaluru is supposed to be an efficient and development-friendly city,’’ he put in.

Will the authorities concerned be a bit more proactive towards making things easier for the real estate sector? One can only wait and watch.

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