1

Streamlining Approval Procedures for Real Estate Projects

Dhanendra Kumar Chairman, Committee on Streamlining Approval Procedures for Real Estate Projects

(SAPREP), set up by Ministry of Housing and Urban Poverty Alleviation, Govt. of India, Former Chairman, Competition Commission of India (CCI) &

Executive Director, World Bank

2

Overview

SAPREP Committee

Key Findings of the Committee Report

*Streamlining Approval Procedures for Real Estate Projects

Recommendations

1

2

3

4

Next Steps going forward 5

Problems

3

Problems

•  Real Estate and Housing Sector, despite being a crucial sector of economy, suffers from a number of complexities and opaqueness during approval process, adding to avoidable delays and additional costs, which ultimately get passed on to consumers.

•  It is the second largest employer after agriculture and is slated to grow at 30% over the

next decade. Tremendous importance in the context of rapidly growing urbanisation. •  Its contribution to India’s GDP estimated at 6.3% in 2013 – multiplier effects additional. •  As per 12th Five Year Plan (2012-17), housing shortage estimated at 58.8 million units. •  Over 90 per cent of this demand is from low-income households who suffer the most. •  As per World Bank’s “Doing Business” Report 2014, India ranks 182 out of 189

economies on ‘ease of dealing with construction permits’. •  Essentially a state subject, there are wide variations among procedures in States.

4

SAPREP Committee Set-up - April 2012, Recommendations made – Jan 2013

•  Committee comprised representatives of Ministries, States, experts, other stakeholders.

•  To examine select best practices in India on streamlining building plan approvals.

•  To study prevalent models - where building plan approvals by certified architects.

•  Suggest a methodology (with IT) for fast tracking Central/State building clearances.

•  Suggest approach for single window clearance mechanism, giving specific focus on

–  simplification of procedural aspects,

–  formulating single composite form with complete listing of requisite documents

–  measures to boost Affordable Housing.

•  Examine problems of Consumers.

•  Examine need of Capacity Building.

•  Methodology adopted - before making recommendations, extensive consultations with stakeholders – and recommendations kept on website – comments fully considered.

5

•  Extensive secondary research on current practices followed in various States & challenges

•  Feedback collected from states via questionnaire

•  Invited public comments

•  Discussion in Committee and Sub-Committee Meetings

•  Industry consultation was undertaken through conferences & forums

•  Suggestions from industry bodies CREDAI, NAREDCO, FICCI, TCPO, Govt of Rajasthan, Value Budget Housing Corporation, HDFC as well as international best practices shared by RICS were collated

•  Process flow charts shared by industries bodies studied to draft an indicative comprehensive flowchart for the country, identifying sequential and parallel activities

•  Technology systems evaluated in detail through separate meetings & discussions

•  Studied various application forms and NOC formats to recommend a sample ‘Composite Application Form’ which can be used to supply information required by various departments

Multi-pronged approach taken to study the issues in detail; views taken from State & local Governments, industry bodies and few private players

6

Problems examined - Numerous Central and State level laws, rules and regulations govern the construction activity…

Land title Planning & Land Construction of buildings

NOC from Central Govt. NOC from State Govt. Service Installations

§  Indian Registration Act , 1908

§  Various State legislations

§  Land Revenue Acts by all State Governments

§  Town and Country Planning Acts by all State Governments

§  Master Plans/ Development Plans

§  National Building Code 2005

§  Local Building Bye-Laws

§  Water connection §  Sewerage connection §  Gas connection §  Telecom connection

Power / Electricity connection

§  Water (Prevention & control of pollution) Act, 1974 and Air (Prevention & control of Pollution) Act, 1981

§  Environnent Impact Assesment (EIA) Notification S.O. 1533 (2006)

§  Ancient Monuments and Archaeological Sites and Remains Act, 1958

§  Works of Defense Act 1903 (WDA) §  Environment (Protection) Act, 1986 §  Forest Conservation Act, 1980

Legal framework

7

PARRALEL  PROCESS  OF  SERVICE  INSTALLATIONSPARRALEL  PROCESS  OF  OBTAINING  VARIOUS  NOCs

Land  Title   Planning  &  Land Construction  of  Buildings

NOCs  from  Central  Depts

Service  /  Utilities  Installations

Revenue  Department  (Tehsildar)

Ownership  Certificate  /  Patta  /Chitta

State  Town  Planning  /  ULB

Non  encumbrance  Certificate

Department  of  Town  Planning  (State  Level)  

Zoning  /  Site  Layout  Approval

In  accordance  with  Master  Plan/City  Dev  

Plan?

Urban  Local  Bodies  (ULB)

In  accordance  with  Building  Bye-­‐Laws?

LOI  for  Building  Plan  Approval

Central  /  State  -­‐  MoEF

Environmental  Clearance

Central  -­‐  AAI

Distance  &  Height  Clearance

Central  -­‐  NMA

NOC  for  Heritage  buildings

Central  –  Ministry  of  Defense

NOC  for  Defense  Establishments

Central  –  Central  Ground  Water  Authority

Bore  well  Registration  Certificate

Central  –  Coastal  Zone  Mngt  Authority

NOC  for  Coastal  Zone

Central/State  –  NHAI  /PWD

Road  Access

State  –  State  Pollution  Board

Consent  to  Establish  /  Operate

DG  Set  Installation

Central/State  –  Forest  Department  (MoEF/State  Dept)

Tree  Cutting  Approval

State/Local  –  Fire  Service  Dept.  

NOC  for  Fire

1

3a

Building  Permit  /  Development  License

Completion  Certificate

4

5

6

NOCs  from  State  Depts

Applicant  /  Developer

3b 3b

Occupancy  Certificate7

LOI  for  building  plan  approval  obtained?All  NOCs  obtained?

Urban  Local  Bodies  (ULB)  

Developer  submits  Application  for  Zoning    

Approval

3

Conversion  of  Land  OR  Land  Use  required?

Yes

Department  of  Town  Planning  (State  Level)  

2

No

State  Board

Water  Connection

State  Board

Sewerage  Connection

State  /  Private

Gas  Connection

State  /  Private  company

Power  /  Electricity  Connection

MTNL  /  Private  Operator

Phone  Connection

Developer  submits  

Application  Building  plan  Approval

Developer  submits  

Application  for  

Demarcation

Construction  begins

Engineer  handed  

over  plot?

Commencement  inspection

Completion  inspection

Conversion  of  land  or  Change  in  Land  Use  

CATEGORY  OF  APPROVALS

DEPARTMENT

TYPE  OF  APPROVAL

# IMPORTANT  SEQUENCE/STEPS

LEGEND

Developer issues …lengthy and cumbersome processes, developer to approach multiple authorities, sometimes snake and ladder situation

11

8

Whilst building laws are framed for safety and protection of people and environment, complexity of the procedure results in uncertainty for consumers as well as developers

Is the location good with adequate urban Infrastructure? Does the developer

have clear land title?

Have all statutory planning and building approvals been received? Is the paper work /

contracts neutral and not one-sided?

What is the actual carpet area that I can use?

How can I know the status of the project and approvals to estimate when construction may get completed?

Is the construction quality and specification as promised/shown in the apartment brochure?

Who do I approach for delays and un-kept promises by developers?

Has the property received the completion certificate after necessary inspections?

1 2

3

4

5

6

7

8

9

Consumer issues

9

With IT enabled one-stop shop, Hong Kong and Singapore at no. 1 and no. 2 ranks respectively, for ‘dealing with construction permits’

International best practices

Singapore

•  Many departments have been inter-connected and manual procedures automated by leveraging IT

•  Singapore takes 11 procedures and only 26 days to get a construction permit

Hong Kong

•  A One Stop Centre (OSC) was set up under the administration of the Efficient Unit (EU)

•  Hong Kong takes only 6 procedures and 67 days to get a construction permit

10

Recommendations by SAPREP Committee

11

6 Key Pillars to streamline real estate project approvals

Key recommendations

Review of existing

procedures & sharing

best practices

2 Single

Window or ‘One-Stop

Shop’ enabled by

IT

3

Special dispensation

for affordable

housing

5

Capacity building in

private and public

sector

6 Transparency, predictability

and accountability

to protect consumer

interest

Compendium of process

and timelines for all Central

& State approvals

1 4

Single Window Clearance Mechanism with all forward and backward linkages at Central Govt/State Govt/ULB/Panchayat levels

12

Compendium of process and timelines for all Central & State approvals Specific Recommendations

1.  Compendium of process & timelines across Central & State Government Depts

2.  Clarity of sequential and parallel processes

•  An indicative flowchart of the overall process for real estate project approvals has been drafted and included in the report

•  Detailed flowcharts for each type of approval have been documented as starting point / reference

3.  Composite Application Form (CAF)

•  A sample of CAF has been drafted and included in the report

4.  Standard checklists (along with listing supporting documents required) to be compiled by States to minimize error and processing of incomplete applications

5.  Nodal agencies or contact points - All State Government and approving authorities are urged to compile a list of nodal agencies or list of people (designation, email id and phone numbers) responsible for each type of approval

1

13

Review of procedures and sharing best practices Remove redundancies, simplify process, automate or delegate powers

2

1.  Consolidate and streamline building laws at State level

2.  Remove duplicity or unnecessary approvals activities/documentation

3.  Simplify approval process by clearly stating applicable rules and restrictions •  There are opportunities to eliminate the need for NOC from certain authorities such as

NMA, AAI, if the restricted areas are marked as red, green, yellow

4.  Identify procedures that can be automated •  Eg online submission of building plans, e-payments

5.  Identify procedures that may be delegated •  Eg planning approvals (zoning plan or change in land use) can be delegated to local

bodies after adequate capacity building

6.  Expedite decision making and clearance of long pending applications

14

Examples of State level best practices

2

Nodal agency (Avas Vikas Limited) for affordable housing; Clear processes and time limits

Consolidation of building laws (AP Building Rules 2011) to make building stipulations clear, easy to comprehend, user friendly

Rajasthan

Andhra Pradesh

Hyderabad

Building plan automation has been a mandatory reform under JNNURM which has resulted in many cities developing custom software/website for online building approvals

Fast tracking G+4 houses by empowering empanelled professionals (Green channel)

JNNURM Cities

1. Many best practices exist which need to be shared amongst States

2. States need to be given monetary incentives by Central Govt. to undertake procedural reforms

3. States and individuals could be recognized through National Awards

Contd.

15

Single Window or ‘One-Stop Shop’ enabled by IT

3

Developer/ applicant submits all information and documents in a Composite Application Form

IT Portal acting as ‘Single Window’

will connect various departments

Approval authorities / Department Users will get developer applications electronically

Responses / status updates returned to the applicant

THE BROAD CONCEPT 1.  Committee is convinced that a technology enabled ‘single window portal’ is the most efficient solution to streamlining building approval process

2.  Recommends two possible systems that may be suggested to States as best practice examples

a.  E-Biz by DIPP b.  APBAS by Indore

(MP) Govt.

16

eBiz Project under National e-Governance Plan (NeGP) - by Department of Industrial Policy and Promotion (DIPP)

Wider in scope across Government depts but not customised to real estate sector

•  One stop shop for investment and business related services

•  Eliminates the physical interface with regulatory authorities at Central, State and local government levels

•  Allows a single payment electronically for multiple services and subsequent splitting and routing of payments to individual departments and agencies

•  Platform for multi-departmental cooperation in data sharing/ verification and service delivery

The Committee is of the view that the eBiz Project can be extended to real estate sector with reasonable effort

Investor

Industries Labor

Pollution Control Board

Industrial Development Corporation

Commercial Taxes

Excise

Water & Sewerage Board

DISCOM

Fire Service

Drug Controller

Municipal Authority

17

Automated Building Plan Approval System (ABPAS) - developed by Madhya Pradesh with DFID support

Designed for real estate sector but current scope limited to building approvals only

•  Online features: submission of building plan; scrutiny as per existing regulations; payment and tracking of application

•  Successfully implemented at Indore for last 2 yrs

•  Will be replicated to all Municipal corporations of MP by June 2013

•  Future plans: integration with approval processes for Change of Land Use at State Govt. and for NOCs from Central Govt. agencies

The Committee is of the view that ABPAS’ scope can be expanded with customization for replicating across states

By Municipal Corporation •  Total project cost is 2 crores •  No upfront cost to Mun. Corp. •  The project is on transactional

basis (2 crores sf area in 2 yrs) at a cost Re1 psf

By Vendor •  Upfront finance cost •  Application software -

AutoDCR customizations, + 2yr maintenance

•  5 persons operational team

FUN

DIN

G

18

Transparency, Predictability and Accountability to protect consumer interest - Specific Recommendations

1. Easy access to building approval information and status updates to avoid pre-sales of projects without requisite approvals

2. Strengthening regulatory mechanisms to enforce building standards; ensure quality

•  Uploading a list of all approved projects on websites of local authority

•  Advertisements to contain accurate information about the approvals recd by developer

•  Online information on the status of building approval applications

•  Prompt notification of application approvals

•  Projects to be registered with (proposed) real estate regulation authority

•  Enforcement of various state building laws by local building authorities or private/third party inspectors

•  To provide consumer redress for building defects

4

19

Special dispensation for affordable housing Specific Recommendations

5

1. Adopt clear ‘definition of affordable housing’ projects, as defined by AH Taskforce Report

2. Increase supply of housing through special provision in building codes

3. Streamline approval procedures to encourage private development of affordable housing

•  Review densification or built-up area norms with specific provisions for ‘affordable housing’ as part of Part III, Annex C of National Building Code, which lays out the norms for low cost housing.

•  Standardize building plans and specifications to encourage ‘manufacture’ of houses rather than ‘constructing’

•  Fast track process/ green channel with 60 day clearance window

•  Nodal agency to act as ‘Single window’ & coordinate approvals from different authorities

•  MoEF may consider special dispensation for affordable housing projects

•  by relaxing the threshold for environment clearances from 20,000 sqm to 50,000 sqm

•  automatic environment clearance of affordable housing projects which have obtained green certification (under LEED OR GRIHA Environment Rating Systems)

20

6

Capacity building in private and public sector Training in-house staff; outsourcing and empowering private sector

1.  Urgent need to build capacity of urban planners at local level, who are competent in town planning laws to be able to award planning permissions, hence reducing the time delays

2.  MoHUPA to take the lead in building capacity of civil or structural engineers and surveyors who need to be trained in building codes & regulations, to expedite building approvals in local authorities. State Governments are also encouraged to conduct such training programs.

1. Build capacity in local bodies by training ULB staff in ‘planning & development’

21

6

Capacity building in private and public sector (Contd.)

a)  MoHUPA may issue guidelines for empanelling and licensing ‘competent professionals/surveyors’ along with minimum competency criteria

–  Architects – to review and verify building plans & zonal/layout plans for building projects

–  Civil / structural engineers – to review building plans, construction; structural design requirements

–  Surveyors (referred to as ‘licensed surveyors’ in State & Local laws) – to review adherence to stipulated building codes and bye laws, including site inspection (for commencement & completion certificate)

–  Lawyers and law firms – to verify legal documents including ownership and non-encumbrance certificate

b)  States to strengthen the concept of ‘licensed professionals/surveyors’ & empower them to perform certain activities in approval process; e.g. certify building approvals for smaller projects (G+4)

c)  Members of credible professional bodies for architects/ engineers/ planners/ surveyors may be considered for empanelment as ‘competent professionals’

2. Empower or empanel ‘competent professionals’ at state/local level to support ULB staff

22

Key built environment professions include •  Architects •  Civil & structural engineers •  Town planners •  Transport, environmental planner/engineers •  Quantity surveyors •  Land surveyors •  Building engineers /surveyors •  Construction project managers •  Facilities managers

Prominent professional bodies in India include •  Council of Architecture (COA) •  The Indian Institute of Architects (IIA) •  Institute of Chartered Accountants of India (ICAI) •  Royal Institution of Chartered Surveyors (RICS) •  Institute of Town Planners, India •  The Institution of Engineers (India) •  Institution of Surveyors – (IoI)

In developed countries or industries, all organized professions are represented by professional bodies. In India, since various real estate & construction professions are still at a nascent stage, the role of professional bodies is limited

d)  MoHUPA may support such professional bodies to take on a much stronger role to lead the development of their respective professions, including assessment of the professional competence of members and regular trainings. This will lead to higher confidence and accountability when members of such bodies are empowered to approve projects

2. Empower or empanel ‘competent professionals’ at state/local level to support ULB staff

Capacity building in private and public sector (Contd.)

e)  MoHUPA may also consider constitution of a professional body for construction (civil/structural) engineers and building surveyors, along the lines of Council of Architecture / Bar Council of India

23

Next steps

1.  Recommendations of the Committee may be approved in principle, after in-house discussion, inter-Ministerial consultation and with any changes as may be needed.

2.  A High Level Committee may be constituted for implementation of key action points.

3.  National workshop of all State Governments may be organized by MoHUPA to deliberate on the recommendations and identify solutions that need to be adopted across States

4.  Immediate intervention for affordable housing - all States to consider setting up a nodal agency (within 3 months) to provide for fast track approvals on affordable housing projects

5.  MoHUPA may constitute a Committee to evaluate how building plans and specifications may be standardized in order to encourage pre-fabricated offsite construction of mass housing in India

24

Next steps (Contd).

5.  All States may initiate the process of moving towards a Single Window Approval System (SWAS) enabled by IT.

−  While States have flexibility in determining IT systems that best suit their environment, e-Biz project by DIPP or ABPAS by MP Government suggested could be considered.

−  Recommended timeline - States may work towards completing the tendering & selection process and achieving a baseline automated system as soon as possible.

−  Recommending funding model - States may consider either funding from Exchequer, or a PPP model, as followed by MP Government in case of ABPAS, under which, competitive bidding may be undertaken in order to have a reputed IT company develop such IT system on a transactional basis (i.e. fee per sq ft approved using the system) without any upfront cost to the State.

25

Next steps (Contd).

6.  States may consider setting up an Empowered Committee headed by Chief Secretary of the respective State, to meet every 3-6 months, in order to monitor progress in streamlining building approvals

−  including implementation of single window mechanism

−  setting up of nodal agency and fast track mechanism for affordable housing projects

7.  A National Level Empowered Committee headed by Honorable Minister, HUPA may be set up to monitor Single Window Mechanism

−  An Annual National Conference with Chief Ministers of States may be convened

−  Constitute Best State/Municipal Award to be declared at a national award ceremony

8.  For mass housing, move to standardization, and concept of “manufacture” in place of construction, and review norms of FAR, and rigors of clearances to make them simpler.

9.  Encourage research on usage of cheaper and locally available materials.

10.  Undertake massive program of Capacity Building and Skill-Upgradation in various sectors.

26

Thank you!

Dhanendra Kumar, Chairman Committee on Streamlining Approval Procedures for Real Estate Projects (SAPREP)

and Former Chairman, Competition Commission of India (CCI)

Email - dkumar1946@gmail.com