The implementation of the Real Estate (Regulation and Development) Act 2016 has provided a fillip to the real estate and construction sector and improved ease of doing business in the country. Added to this, the reforms in construction approvals have reduced the inordinate delays in the completion of projects. Over the years, the government has undertaken various policy initiatives and reforms, which have resulted in increased transparency and better governance in the sector. Before purchasing a property, it is good to check if the developer has received the necessary approvals. It minimises the risks for the buyers. Faster approvals benefit both developers and buyers by reducing the overall project costs.
How have construction approvals improved in India?
There are several regulatory approvals required before the commencement of a project. For example, there is a building plan approval which is granted by the local municipal authority. It certifies that the project is in compliance with the set codes. Commencement certificate is another crucial approval builders must obtain. Without this certificate, builders cannot initiate any construction activity in the project.
In recent years, several states and government bodies have taken measures to streamline the approval process and speed up the construction of projects. For example, the introduction of online single-window systems in major cities such as Mumbai, Chennai, Gurgaon and Delhi has simplified the process of obtaining building permits and construction-related approvals. Moreover, the system is transparent with online applications and digitised tracking, thus reducing time and speeding up the project completion.
See also: Invest in a project only if the builder has all these approvals in place
How do faster construction approvals reduce project costs?
Builders can incur significant loses owing to delays caused in getting construction approvals. They operate in a capital-intensive sector and depend heavily on debt and construction loans. So, a builder, who is already paying a high interest, can incur more costs if the project gets delayed. Besides, there are other costs involved, such as labour and material costs.
Delays in approvals could extend the project by six months to more than a year. So, construction delays can have a compounding effect on the overall costs for a developer.
With a streamlined construction approval process in place, a developer can benefit not just with faster project completion but also reduce costs. Industry experts suggest the cost per unit in a project can be lowered by nearly 20-30 per cent. Ultimately, this will benefit the homebuyers.
Click to read: How can the approval process in urban development be streamlined?
Challenges
The Online Building Permit System (OBPS) has been implemented in all major cities and urban local bodies. Some states have integrated the local systems with a centralised online single-window clearance system. In other cities, the offline mechanism of seeking approvals is prevalent and there is a long way to go before the system is accessible across all smaller towns or Gram Panchayats. There is also a need for training to enable officials to handle the automated systems with ease.