CREDAI to PM, pleads for widespread reforms

CREDAI to PM, pleads for widespread reforms

CREDAI for ‘Housing Surplus’ India;

Revive Realty to Rejuvenate Economy

·         Says Real Estate supports 250 industries, creates massive employment, contributes 11% to GDP

·         Calls for end to policy paralysis, presents 10-point agenda

NEW DELHI, July 18, 2012: Pointing out that real estate development can revive the sagging economy, developers’ apex body CREDAI has called for launching a mission to make India Housing Surplus from the current status of a housing deficit nation by 2020.

Real Estate supports 250 industries, generates employment and contributes 11% to GDP, CREDAI national President Mr. Lalit Kumar Jain said and rolled out the roadmap at the end of the organisation’s general council meeting in Delhi today.

CREDAI also publicized an open letter to the Prime Minister and set an 10-point agenda of action for taking the nation on an accelerated growth path while solving the housing problem faced by millions of people across the country.

Pointing out that the economic liberalisation initiated by Prime Minister Dr Manmohan Singh as the finance Minister in 1990 have not covered the real estate sector, CREDAI called for comprehensive reforms for the sector covering land, administration, banking and tax.

CREDAI reiterated its long standing demand for a Single Window clearance system and pointed out that McKinsey has said in its report to the Government of India that delays in approval processes alone increase sale value of houses by 40%. Delays due to multi clearances/approvals numbering over 40 by various Agencies/Departments of the Government - the average time being 18 months – are the order of the day though most of the Departments have the same series of check lists. This obviously leads to duplication of submission by architects. In fact, the number of building plans sanctioned over the past ten to fifteen months has drastically come down.

The only way forward for a clean and cost effective housing sector is an e-based standardization of single window approval process. CREDAI has submitted a Single Window Act for consideration to Ministry of Housing (HUPA) and Ministry of Urban Development. However, there has been no progress at all, Mr Jain said.

Presenting CREDAI case for close coordination among various government departments, he said the various Central and State Government Departments are issuing directives in isolation. For instance, the Environment Ministry issued Building Approval guidelines authorising its Committees to link the height of a building to its distance from a Fire Station, though the Ministry is neither the technical nor the administrative head of Fire Safety issues! Such arbitrary exercise of power by MoEF has crippled the sector due to approval delays, adding to costs.

“Sir, we developers are entrepreneurs, conducting our business to the best our ability. We too hate the system that labels us as crooks, cheats and breeders of black money. Few people seem to realise that we are victims of the system and not beneficiaries or generators of black money for that matter,” he said in the open letter to PM.

He pointed out that developers are forced to deal with 140 officials at various stages to obtain 40 plus clearances and history is witness to the fact that corruption creeps in wherever there is a human interface. “Files are not cleared unless one greases the palms,” he lamented.

On land reforms, CREDAI said restrictive land use has led to raising the cost of the tenements, killing agriculture land, reducing Green cover and made physical infrastructure costlier. It is high time the policy makers consciously shed their skeptical, narrow views on land use. Andhra Pradesh has set the right trend by removing the concept of FAR leading to stabilization of prices and creating adequate supply. 

The current home loans for affordable housing segment with 1% interest incentive is still very costly for many needy people. The interest rates on home loan, especially in affordable category, cannot and should not be more than 7%. Also, the current guidelines by the Reserve Bank are anti-housing industry as the cost of finance is very high that in turn makes housing costlier.

Currently, any purchase of housing unit costs @ 36% in direct and indirect taxes which include VAT, Service Tax, Excise Duty and Municipal Taxes etc., At this rate, one has to earn 150% of one’s current income to be able to afford a house and end up paying a heavy income tax of 32%! 

There is a need to devise a special tax-free affordable housing project scheme. Though there will be seemingly a revenue loss, this will be more than offset by the collection of other indirect taxes, he said.

Delving on slum rehabilitation, CREDAI said as much as 15% of entire population of this country lives in slums. Few urban areas in state like Maharashtra have come up with slum rehabilitation policy. However, these policies fall short of expectations to achieve desired results, mainly because they are impractical. Also, the Rajiv Awas Yojana in its present form cannot achieve desired results. “What we require is slum lord free environment where all the slum-dwellers attaining majority age of 21 get their own rightful homes,” Mr Jain argued.

These issues cannot be resolved by routine administrative remarks on files like “Please attend to” or “for your attention please”. Housing is a State subject. Even at the centre, housing policy making is fractured between two Urban Ministries, and several other Central Ministries which dabble into the matter at their own sweet will without even referring the matter to either of the Urban Ministries.

From the point of accountability, CREDAI suggested that for every building proposal submitted, there should be a mention of Revenue to be generated, Employment opportunity created, contribution to GDP, along with the date of application submission and the date of final approval. In case of delay, those responsible must be punished.

CREDAI said India’s urban population has grown from 290 million in 2001 to 377 million in 2011 which accounts for over 30 percent of the country’s population. The number of cities and towns has also increased from 5,161 in 2001 to 7,935 in 2011 - a 51% growth. The number of 1 million plus cities has grown from 35 in 2001 to 53 in 2011, registering a 45% growth.

By 2031, India will have more than 87 metropolitan areas and the country’s urban population is likely to soar to over 600 million, adding about 225 million people to present urban population.

“If this goes unchecked and unattended, we will have an explosive situation of hundreds of slum colonies everywhere because housing has become unaffordable,” Mr Jain said.

“Sir, we have been trying to seek an appointment with you for long since we cannot hope to achieve anything tangible without your intervention. We have already made several representations to all the concerned ministries but with no positive response,” the open letter said.

“It is in this context that, Prime Minister Sir, we would like to urge upon your honour to pay an immediate attention to the Future Shock scenario and take concrete steps to tackle the crisis,” the letter added.