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Regulatory clearances including environmental adherences are posing huge obstacles to the realty sector in general and timely delivery of projects in particular.

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Timely delivery of realty projects is one of biggest crisis plaguing the realty sector now. Even though there are early signs of a realty resurgence  particularly in the National Capital Region (NCR) across Gurgaon, Noida, Greater Noida, Faridabad and nearby areas along NH-1, where a large number of projects have already been announced, the million-dollar question remains – whether they will be delivered on time or not… Data compiled by the Prime Minister’s Project Monitoring Group (PMG) indicates that across India, industrial and infrastructure projects including roads and the realty sector, worth over ~15lakh crore, are lying stalled for want of various clearances and other issues. Of this, power is the most troubled sector where 136 projects worth over ~ .14 lakh crore are stalled. The issues and clearances of the stalled projects include environment and forest clearances, land acquisition, lack of co-ordination between various government departments and clearances that are stuck at the state government level. Apart from the PMG data, developers say that in Delhi NCR alone, more than 200 realty projects are on hold due to the delayed approvals from the  authorities. “More than 200 real estate projects in Delhi-NCR are stuck due to this menace. Until and unless these clearances are not obtained, the developer cannot start construction work for the project. Delayed approvals from the authorities create hindrance and obstacles in the developer’s goal to give deliveries on time,” said Sushant Muttreja, managing director, Cosmic Group. Citing the inordinate delay in obtaining approvals for projects that are stalling growth of the real estate sector and also the economy of the country as well, Lalit Kumar Jain, CREDAI chairman and CMD of Kumar Urban Development, has already urged the Union government to form a high-powered realty committee to accelerate big ticket realty projects worth between ~200 crore and ~1 000 crore. 18Real estate projects with investments above ~1 000 crore have been routinely facing

 

 

 

 

 

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inordinate delay in  securing approvals mainly due to the Central government’s directive making it mandatory for all developers to obtain environment clearance certificates before launching the projects. CREDAI chairman Jain says the government could appoint a high-level committee for the realty sector on the lines of the steering committee for  infrastructure projects worth over ~1 000 crore. “The delay in obtaining environment clearance for big ticket real estate projects has become a major deterrent for developers. For instance, in Maharashtra alone, more than 1,200 proposals with an estimated investment of over ~1 ,000 billion are stuck in environmental impact assessment (EIA) clearance.” “Many real estate projects are stuck for the want of clarity or standard operating procedure (SOP). For instance, a high rise committee has been absent in Pune for the last one year. Similar issues exist across the country,” he adds.

Prithviraj ChavanProjects worth ~5,000 crore would get approval in this year itself. Maharashtra had a target of commissioning projects worth over ~3 lakh crore by 2021.
Prithviraj Chavan, CM, Maharashtra.

The government itself admits that forest and environment clearance has been with a problem with the housing sector. “There have been certain rules, regulations, and they uniformly apply to not only the realty sector, but also to all the sectors, be it is mines, steel, power, coal, housing,  irrigation or whatever. So the idea is to try and find out some way in which these processes can be simplified,” Arun Misra, secretary, Ministry of Housing and Urban Poverty Alleviation, told Realty & More in an exclusive interview last month. Moreover, the shoddy approval process by the planning authorities or the municipal corporations also contribute to the abnormal delays in attaining  the environment clearances. So, in many cases in NCR, developers have not been able to meet their deadline due to the lag caused by various bureaucratic processes which have also been an operative factor in delayed project clearances. In the NCR for instance, a significant number of residential projects in the areas such as Noida have been delayed because of disputes not only relating to environmental issues but also with regards to land acquisition. Santosh Kumar, chief executive officer (CEO), Operations, Jones Lang Lasalle India (JLL), said: “Delay in  regulatory clearances is a critical reason for delays in project deliveries. In many cases of delayed projects in NCR, the water and sand crises as well as environmental regulations which developers have not been able to meet to have played a role.”

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final magazine2_Page_19PRICE ESCALATION

A question also arises: Will property prices increase following the delay of the ongoing projects? Property  consultants feel prices may be hit to a certain  extent. “The cost of delay due to any shortage of clearances will force  developers to pass on the burden to end consumers. Yet, in the current market when sales are already slow in several locations, many of them might not be able to increase prices, taking a hit on their margins,” said Anshuman Magazine, managing director of property advisory firm, CBRE. Sunil Mantri, president, National Real Estate Development Council (NAREDCO), said: “Environment clearances take a  long time and hence escalate costs. The current regulations on foreign investment make it difficult for small developers to access low-cost capital. Currently, the approval of building plans by the planning authority or a municipal corporation results in abnormal delays.”

RISING INVENTORIES

According to a JLL report, with delivery delays, inventory levels across India have risen significantly. The pan India inventory of the residential stock is now well above the comfort level of 14-15 months. Mumbai has an inventory of close to 4B months, Delhi of 23 months and Bangalore of 25 months. These are close to the levels of 2007, when the residential real estate market’s inventories were at an all time high. Besides bureaucratic delays, realty analysts also say the laid back attitudes of the central and state governments on the issue of environmental clearance are also to be blamed. “Both the Centre and state governments should be  proactive on issues like environmental clearance for proposed projects to give confidence to developers to lift the sector. But although the realty stocks are showing low  trade now, investors are generally steering clear of them as nervousness prevails about India’s future,” said Daljeet Singh Kohli, head of research, India Nivesh Securities, a Mumbai-based brokerage. Looking at the ongoing and upcoming realty projects in many metros and their adjacent areas, the blame-game between authorities and developers has taken center stage.

Pan India, projects worth ~15lakh crore, including roads and realty sectors, stalled for want of clearances, says PMG data.
In Delhi-NCR alone, more than 200 realty projects are on hold due to the delayed approvals.

Major infra projects stuck in Mumbai
• The 32 km long phase 2 of the Mumbai metro project awaits environmental clearance
• The extension of the Bandra Worli Sea Link
• The Navi Mumbai International Airport
• The ~21,000 crore, 60 km long, Churchgate-Virar elevated rail corridor

With delivery delays, inventory levels across India have risen significantly. The pan India Inventory of the residential stock is now well above the comfort level of 14-15 months. Mumbai has an inventory of close to 48 months, Delhi of 23 months and Bangalore of 25 months. These are close to the levels of 2007, when the residential real estate market’s inventories were at an all-tlme high: Jones Lang Lasalle India (JLL) report.
As per a recent survey, which was conducted to identify realty projects being developed within a 10 km radius of the Okhla Bird Sanctuary, it has been found that around 40 developers were carrying on construction without any environmental clearance.

NOIDA MESS

As per a recent survey, which was conducted to identify realty projects being developed within a 10 km radius of the Okhla Bird Sanctuary, it has been found that around 40 developers were carrying on construction without any environmental clearance. The National Green Tribunal (NGT, in its August 14 order, had ordered for more such surveys. The Noida authority recently said that a total of 104 realty projects, located within 10 km radius of the Okhla bird sanctuary, were affected because of NGT’s order that had directed the authority to stop all kinds of construction. The Gautam Budh Nagar district divisional forest officer (DFO) had issued notices to only 54 realty projects, which are located within 10 km radius of this bird sanctuary. However, realtors blame the UP government and the  Noida authority for the present mess after the NGT order. “The Okhla Bird Sanctuary was declared a protected wildlife habitat in 1990 by government agencies. After that in 2006, the Supreme Court directed states to declare 1 ° km area around national and bird sanctuaries as eco-sensitive. But why didn’t the authority frame its master plan keeping in mind the fact that Okhla is a protected site? Builders got the land in 2008 or later from the authority. Therefore, the authority or UP government is to be blamed for this crisis which is brewing after the NGTorder,” said a realtor.

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sunil-mantriEnvironment clearances take a long time and hence escalate costs. The current regulations on foreign investment make it difficult for small developers to access low-cost capital. Currently the approvals of building plans by the planning authority or a municipal corporation result in abnormal delays
Sunil Mantri, President, NAREDCO

santoshDelay in regulatory clearances is a critical reason for delays in project deliveries. In many cases of delayed projects in NCR, the water and sand crises as well as environmental regulations which developers have not been able to meet to have played a role
Santosh Kumar, CEO, Operations, JLL

Arun mishraThere have been certain rules, regulations, and they uniformly apply to not only the realty sector, but also to all the sectors, be it is mines, be it steel, be it power, be it is coal, housing, irrigation, whatever. So the idea is to try and find out some way in which these processes can be simplified
Arun Misra, Secy, Ministry of Housing and Urban Poverty Alleviation

ANSHUMAN MAGAZINE, CHAIRMAN & MD, CBRE SOUTH ASIA (P) LTDThe cost of delay due to any shortage of clearances will force developers to pass on the burden to end consumers. Yet, in the current market when sales are already slow in several locations, many of them might not be able to increase prices, taking a hit on their margins
Anshuman Magazine, MD, CBRE

MAHARASHTRA MESS

Beyond Delhi-NCR, even infrastructure projects in Maharashtra – Mumbai Metro and Mono-Rail projects – are yet to receive the due impetus to break the shackles of red-tape. Recently, Maharashtra Chief Minister Prithviraj Chavan said that projects worth ‘(5,000 crore would get approval in this year itself. Maharashtra had a target of commissioning projects worth over ‘(3 lakh crore by 2021. It involves moving forward on new projects. It also means reviving projects that have been derailed as investors have been unhappy with issues of land availability and environment clearances. Major infra projects stuck in Mumbai and its adjacent areas which await environmental clearance are: the 32- km-Iong phase-2 of the Mumbai Metro project, the extension of the Bandra-Worli Sea Unk, the Navi Mumbai International Airport and the ‘(21,000 crore worth 60 km long, Churchgate-Virar elevated rail corridor. Moves to boost the sector are the need of the day. While the government is likely to promote newer techniques  and innovations in the construction sector, developers are trying to do their bit. “Apart from government, we are also looking at some ways as to how we improve the clearances and bring in new systems in approval methods which can reduce the construction costs,” Mantri said

DEVELOPERS SPEAK

Lalitkumar Jain picThe delay in obtaining environment clearance for big ticket real estate projects has become a major deterrent for developers. For instance, in Maharashtra alone, more than 1,200 proposals with an estimated investment of over ~1 ,000 billion are stuck in environmental impact assessment (EIA) clearance
Lalit Kumar Jain, CREDAI Chairman & CMD, Kumar Urban Development

sushant_mutterejaMore than 200 real estate projects in Delhi/NCR are stuck due to this menace. Until and unless these clearances are not obtained, the developer cannot start construction work for the project. Delayed approvals from the authorities create hindrance and obstacles in the developer’s goal to give deliveries on time
Sushant Muttreja, MD, Cosmic Group

rahulgaurWe definitely need reforms as far as policies are concerned, since the ‘environment clearance’ is one of the fundamental reasons of project delays and cost escalation. I suggest all the stake holders within the built environment, including the government authorities be made a party to the regulatory regime, once the regulator is put in place. The ideas are to fast track the process, and not add to another set of clearances and hurdles for the developers
Rahul Gaur, CMD, Brys Group

Harindra Nagar-MD-Paras BuildtechYes, the environment clearance has definitely become an obstacle. It not only delays the delivery of the projects but also affects the image of the developer. The developers’ community has been voicing its concerns from the platform of the CREDAI and we have suggested the authorities to have checklists of clearances rather than keeping the process open for different interpretations by individual officers or ministers. It’s important to make everything time-bound and transparent to all stakeholders
Harindra Nagar, MD, Paras Buildtech

Tarun Shienh, CMD, Premia GroupThe present ‘environment clearance’ process with its sequential hurdles either forces a project proponent to give up the venture, or burdens the project with time and cost overruns. And the delay in any project due to environmental clearance or any other issue leads to hamper the image of the developer, and it also affects on the profit booking of the company. I feel that the mindset behind the clearance process seems to be two-fold, which needs to be changed for a speedy clearance. Firstly, not all projects need the same degree of examination, and secondly, the department follows the “precautionary principle”, that instead of making any error it is better to withhold.
Tarun Shienh, CMD, Premia Group

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