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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) Disclaimer - The views expressed in this presentation are personal and do not reflect the views of the Ministry of Housing and Urban Poverty Alleviation (M/HUPA). November 1-2, 2012 Hotel The Leela, Mumbai

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

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Page 1: 1 Streamlining Approval Procedures for Real Estate Projects Dhanendra Kumar Chairman, Committee on Streamlining Approval Procedures for Real Estate Projects

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Streamlining Approval Procedures for Real Estate Projects

Dhanendra KumarChairman, 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)

Disclaimer - The views expressed in this presentation are personal and do not reflect the views of the Ministry of Housing and Urban Poverty Alleviation (M/HUPA).

November 1-2, 2012 Hotel The Leela, Mumbai

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Overview

Importance of real estate and construction sector and key challenges1

Introduction to SAPREP* Committee

Key findings of the Committee report

Recommendations and next steps

*Streamlining Approval Procedures for Real Estate Projects

Your feedback and suggestions

2

3

4

5

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Importance of real estate and construction sector and key challenges

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Real estate and construction sector has continued to contribute significantly to the country’s GDP; Average contribution over 2011-16 estimated to be 17.5%

• On an average, real estate contributes 8% while construction contributes 9.5% • Both real estate (19.5% CAGR) & construction (CAGR 18.3%) have witnessed

tremendous growth since 2001

Source: RICS Research: Real estate and construction professionals in India 2020

Importance of the sector

0%

20%

40%

60%

80%

100%

GDP 242 1,346 2,080

Real Estate Services 30 128 197

Construction 28 107 164

2001 2011 2016

Contribution of Real estate and Construction to India’s GDP (USD Bn)

17.5%17.5%

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Given that the sector is riddled with many complex issues threatening to slow down growth, multiple efforts are being made by Government to address these issues

Cumbersome project approval process

Absence of regulatory body

Lack of market data & transparency

Land values & acquisition

Shortage of skilled workforce

Lack of standards and uniform practices

SAPREP Committee set up by Ministry of Housing to look at streamlining approval procedures

Draft real estate regulation bill

Eg. NHB Residex, Central registry, digitization of land records

Focus on capacity building in new JNNURM, capacity building schemes, NSDC etc

Eg. building standards, affordable housing standards?

Land acquisition bill, valuation standards

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Introduction to the Committee set up by MoHUPA on ‘Streamlining Approval Procedures for Real Estate Projects (SAPREP)’

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SAPREP CommitteeTerms of Reference

• Examine few best practices on streamlining building plan approval processes in cities like Pune, Hyderabad, Mysore and Indore etc.

• Study of Bihar model on the obtaining of building plan approvals from certified architects.

• Suggest a methodology for fast tracking Central/State building clearances.

• Suggest a systematic approach through which all cities and states can develop fast track, single window clearance mechanism giving specific focus on

– simplification of procedural aspects,

– formulating single composite form with complete listing of the set of documents necessary to accord sanction by the authorities and

– automated system for building plan approval with special emphasis on Affordable Housing.

SAPREP Committee was set up to study successful models in Indian states as well as international best practices in order to suggest a methodology for fast track Central/State building clearances.

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Work done so far• Extensive secondary research• Feedback collected from states via questionnaire• Invited public comments• Committee and sub-committee meetings

– Representatives from approval authorities invited to attend meetings and contribute to the deliberations

Current status• Draft report has been prepared and will be submitted to the Ministry of

Housing and Urban Poverty Alleviation in November 2012

SAPREP Committee

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Key findings of SAPREP Committee- Magnitude of the problem - Legal framework and other challenges- Developer’s issues due to existing process- Consumer issues

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India – ‘Dealing with Construction permits’

According to a World Bank Study, India has one of the most cumbersome and lengthy process for seeking construction permits

Source: Doing Business 2013 – report by The World Bank and IFC

Magnitude of the problem

But, still a long way to go as India ranks 182 out of 185 countries

India has reduced time from 227 days to 196 days to process building permit applications by implementing strict time limits at municipalities

India – Overall ‘ease of doing business’

And it has a huge cost associated with this process -passed on to consumers

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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

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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…resulting in a lengthy and cumbersome process where developer needs to approach multiple authorities

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Multiple factors add to the complex process, leading to uncertainties and delays in building approvals

‘Land’ is a state subject resulting in multiple laws,

rules and regulations

Ambiguity and discretion

Complex building bye laws with excessive control

Complexity and coordination hurdles with multiple depts.

Rigid urban planning processes

Lack of transparency and corruption

Lack of institutional clarity

Developer issues

World Bank Study estimates

• If procedures are too complicated or costly, builders tend to proceed without a permit.

• By some estimates 60–80% of building projects in developing economies are undertaken without the proper permits and approval

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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?

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2

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Consumer issues

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What have other countries to reform their systems? Introducing or improving one-stop shops was among the most common features of construction permitting reforms in the past 8 years

Source: Doing Business 2013 – report by The World Bank and IFC

Source: Doing Business 2013 – report by The World Bank and IFC

International best practices

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Recommendations and next steps

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6 Key Pillars to streamline real estate project approvals

Bring transparency, predictability

and accountability

to protect consumer

interest

1

Review existing systems

and procedures

2

Single Window or ‘One-Stop

Shop’ enabled by

IT

3

Reforms to promote

affordable and green housing

4Share best practices

and incentivize

States

5

Key recommendations

Capacity building in

private and public

sector

6

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State wise compendium of all processes and timelines for

Transparency, Predictability and Accountability

1

Composite Application Form, Standard checklists and timelines

State wise compendium of process and timelines- what approvals- where to go and- by when to expect

Transparent processesClarity of sequential and parallel processes

Shift from paperwork and chaotic processes

While Central Government can facilitate these, States will be responsible for implementation

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Transparency, Predictability and Accountability

With consumer interest at the heart of all reforms…

Access to building approval information and status updates to avoid pre-sales of projects without requisite approvals

Strengthening regulatory mechanisms to enforce building standards; ensure quality

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

• 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

1 Contd.

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1. Remove duplicity or unnecessary approvals and documentation • Eg dual process of getting conversion of land use approval from revenue

department as well as town planning / local dept may be done away with

2. Simplify or improve process by clarity in 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

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

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

delegated to local bodies after adequate capacity building

Review of systems and proceduresRemove redundancies, simplify process, automate or delegate powers

2

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

3

Nat

iona

l Ser

vice

s D

eliv

ery

Gat

eway

(N

SD

G)

• Application Routing• Processing (Scrutiny, Approval)• Communication• MIS Reporting

Department Portal

Approval authorities /

Department Users

IT Portalacting as ‘Single

Window’

will connect various

departments

Developer / Applicant

Developer submits all information and documents in a Composite Application Form

Source: Graphic representation adapted from e-Biz being developed by DIPP

Responses / status updates from various authorities returned to the applicant

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With the help of IT enabled one-stop shop, Hong Kong SAR, China and Singapore have achieved no. 1 and no. 2 ranks respectively for ‘dealing with construction permits’

International best practices3 Contd.

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

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Taiwan, China, made the biggest improvement in the ease of dealing with construction permits in the past year

Source: Doing Business 2013 – report by The World Bank and IFC

By improving one-stop shop and introducing private inspections by building inspectors, 14 procedures were eliminated and 31 days were saved

Source: Doing Business 2013 – report by The World Bank and IFC

International best practices3 Contd.

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Reforms to promote for affordable and green housingthrough planning/development policies and approval procedures

4

Clear ‘definition of affordable housing’ projects

Fast track process/ green channel with 60-90 day clearance window

Exemptions from certain NOCs or ‘deemed approval’ to expedite supply of affordable housing

Nodal agency to act as ‘Single window’ and coordinate all approvals from different authorities

Green certified projects to be exempt from environment clearance

Revision of building codes with specific provisions for ‘affordable housing’ including revised densification (built-up area) norms and standardization of building specification

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Share best practices and incentivize StatesRecognize and reward States and individuals to build competitive spirit

5

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 incentivized by Central Govt. to reform procedures

3. States and individuals could be recognized through National Awards

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

6

Architects • Empanel/Outsource - to review and verify (self-certify) building plans and zonal/layout plans for building projects

Civil / structural engineers

• Empanel/Outsource - to review application of building plans, construction as well as structural design requirements

Building surveyors / inspectors

• Train or empanel - to review adherence to stipulated building codes and bye laws, including site inspection

Lawyers and law firms

• Empanel/Outsource - to verify legal documents including ownership and non-encumbrance certificated

Other ULB Staff • Train - ULB staff on procedures and IT

Urban Planners • Train – ULB staff to be able to approve land-use/zonal plans*

*India needs ~40,000 urban planners for 7935 towns; only 616 planners annual supply from educational institutions

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Streamlining building

approvals

Leverage technology to connect departments information flow

Examine approval processes that can be removed, simplified or delegated

Expedite decision making and clearance of long pending applications

Introduce fast track channels for projects that meet ‘affordable housing’ criteria

Build capacity in local bodies

Clear processes and timelines for greater clarity and predictability

Consolidate and streamline building laws at national and state level

1

2

3

4

5

6

7

Technology platform is being identified

Review of processes, Composite Application Form

Facilitation window in ULB, Empowered committee, Ombudsman or Appellate Authority

Consider nodal agencies, special exemptions

Document processes, checklists, timelines, automatic/deemed approval

Land surveyors, urban planners, building inspectors

Summary

Summary

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Next steps

• National workshop of all states to discuss implementation – end November

• Pilot implementation of the recommendations in one or two states

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Your feedback and suggestions….

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Your feedback and suggestions…

1. Which approvals prove to be the biggest bottleneck?

2. Areas where standardized documents and checklists would be most helpful

3. Identifying redundant processes (which can be eliminated) and areas of duplication

4. Suggestions to streamline approvals from MOEF/AAI/NMA/ Defense Ministry

5. Should Environment Impact assessment under MOEF should be undertaken at the Master Plan / City Development plan or for every project approval stage? What should be the minimum threshold for which environment clearance should be required?

6. What kind of incentives will be effective to motivate States to implement procedural reforms?

7. Can the simplified norms of Andhra Pradesh be adopted in other states to incentivize housing

8. What special exemptions should be considered for affordable housing

9. What facilities/functionalities should be made available in e-platform as a single window shop for building approvals

10. Is there need for an appellate authority or ombudsman to hear appeals against building approval related cases

11. Other suggestions on how building approvals can be facilitated and expedited

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Thank you!

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

and Former Chairman, Competition Commission of India (CCI)

Email - [email protected]