Deepak Parekh favours online approval to tackle 'speed money' menace

HDFC chairman Deepak Parekh favours an online, single- window clearance system for housing projects to cut huge delays and cost overruns plaguing the real estate sector.

Parekh has said that various approvals for housing projects take as long as 18- 24 months, particularly in some big cities, and construction gets delayed even if developers wish to do it immediately.

Meanwhile, the developer needs to service the loan taken for acquiring the land without receiving corresponding cash flow.

Further, because of the multiplicity of approvals, "speed money" is demanded often at every stage of approval. The end result is that all these time and cost overruns are eventually borne by the home buyer, he said.

Stressing the need to make housing more affordable for Indians, Parekh said in his annual letter to shareholders of HDFC, " My back- of- the- envelope estimation is that transparency and timely approvals can reduce costs for the end consumer by almost 20 per cent." Delays in approvals from various regulatory and administrative authorities have been a major problem for real estate developers, who are looking forward to reforms that can end the malaise.

Real estate industry body Credia chairman Lalit Jain said that about 40- 48 approvals, depending on the city, are required to start a project and these clearances take nearly three years on an average. The cost of a project goes up by 40 per cent in metros and by 25 per cent in non- metros because of such delays as appreciation in land costs, as also the cost of corruption, add to the overall cost of the project, he said. Jain added that home prices can be cut down by 20- 30 per cent if the approval time is reduced to 30 days, which is entirely possible.

Parekh added that land is a state subject, but a directive from the Centre to ensure that all states move towards e- governance would go a long way. A few states have already demonstrated that red tape can be cut as far as granting of building approvals are concerned, he further added.

Courtesy: Mail Today