Maharashtra has decided to reduce the number of approvals needed for real estate projects, which analysts say would result in affordable housing and relieve developers’ cash flow issues.
An analysis by JLL India says the current initiative by the government would address the problems faced by developers who have been complaining about the delays in getting approvals and projects getting tied up in bureaucratic red-tape leading to cash-flow issues.
Ramesh Nair, COO – Business & International Director of JLL India, said the state government aims to go online for granting permissions/ clearances required from local bodies and the revenue, urban land ceiling departments. This would increase transparency, which will get further efficient when land records are put up online.
“If developers pass on the benefits of quicker approvals to home buyers, private housing will become affordable, especially at a time when 69 per cent of Mumbai’s unsold housing stock is priced above Rs 10 million,” Nair was quoted by Economic Times as saying.
An approval cycle consists of key permits like intimation of disapproval (IOD), commencement certificate (CC), occupancy certificate (OC), building completion certificate (BCC), among others.
About 40 IOD conditions are to be met by the builder to be eligible for applying for CC. The final authorisation to begin construction, which is issued upon submission of all required NOCs and compliance to IOD conditions, is the CC. It is given in two stages: CC up to plinth level, CC beyond plinth level.
OC allows the builder to occupy the building but is not considered a final document because the building company still requires the certificate of completion. The company’s architect must submit a formal letter stating that construction has been completed, according to the standards set forth in the IOD and CC.
BCC is considered to be the ultimate document that the building company requires to fully occupy the building and connect it to utilities.
According to JLL, an analysis of the number of proposals received and clearances granted by Municipal Corporation of Greater Mumbai (MCGM) for projects in Greater Mumbai over the last decade shows an alarming trend. There has been a massive gap between new building proposals that have come to the MCGM for approval and the number of proposals that were issued for the final clearance, i.e. the BCC.
“An average 1,500 projects entered the system for approval each year, while only 730 OCs and 118 BCCs were granted by MCGM. This suggests that there has been a mounting backlog of projects, which are yet to receive one or more approvals,” Nair was quoted by ETRealty.
“There could be several other projects, which despite having received an IOD and/or CC, may not have received the OC and/ or BCC and will likely have to wait for a long time if they are to get the final approval at all.”
The building proposals that received OC have averaged just about 46 per cent of the number of new proposals that entered the process for approval over the last decade. The proposals that received the ultimate approval – the BCC averaged a mere 4 per cent in 2013-14. The reformed workflow mechanism would have to process not just new building proposals, but also cope with the massive volume of proposa