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Updated: June 2, 2012 14:50 IST

The building bricks

Sujay Mehdudia
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Shortage of homes: Single-windo clearance system preferred. Photo: K.V. Srinivasan
The Hindu Shortage of homes: Single-windo clearance system preferred. Photo: K.V. Srinivasan

URBANSCAPE: Realty industry suggests reform measures to cut down on time and chance for corruption

Upset at being largely blamed for the prevalence of black money in the country, the Confederation of Real Estate Developer's Associations of India (CREDAI) has called for unleashing of immediate reforms governing the sector to put an end to “license raj” and tackle the menace of illegal transactions in realty deals.

CREDAI chairman, Lalit Kumar Jain said the real estate developer community has become a favourite punching bag whenever there is talk about the black money curse. ``We hate the system that labels us as crooks, cheats and breeders of black money. But the matter of fact is that the various bottlenecks at the government level, both at the Centre and in several States, are equally responsible for this menace.

He said the real estate sector is still governed by controls and the ‘license raj' regime. The developers have to get over 40 clearances which lead to human interaction with over 150 officials at various stages. “Any delay at any stage obviously gives rise to greasing of palms as the developer is always anxious to finish his project in time and avoid delays. As you all know, real estate is a highly capital intensive industry and any delays would only add to the interest burden for the developer who scrupulously tries to avoid it since the increased costs would lead to a cut in margins and rise in the cost for the customer,” Mr. Jain explained.

Mr. Jain said the real problem lay with land transactions, corruption related approvals and license process, power in the hands of officials who can threaten to stop work, the political system and above all the taxation system. A McKinsey report to the Union Government on cost of approval had clearly pointed out that the costs incurred on account of various approvals could constitute anything up to 40 per cent of the sale value.

Mr. Jain said restricted land use and continued pressure on land availability is also one of the root causes of high costs of inputs and the resultant sale price. “Like any prudent businessman, we are also here to make profits, otherwise it simply does not make sense for us to be in the business,” he remarked.

CREDAI suggested single window system for project clearances to cut down time and chance for corruption. It suggested reforms in four key areas that impact the real estate - administrative land, tax and banking. ``There is no clarity on land policy and there is absolutely no control over cost of funding and other inputs. With rapid urbanisation, the nation witnessing an ever increasing demand-supply mismatch and we developers are being blamed for an artificial shortage of homes. CREDAI has suggested Special Housing Zones on lines of SEZ.

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