DELHI: Real estate developers say they are facing cost escalation on several residential projects across cities as officials are holding back routine approvals citing the election code of conduct.
They said work has particularly been affected in Mumbai, Bangalore, Pune, Noida, Ghaziabad and Gurgaon as officials lack clarity on how to deal with routine matters such as building approvals. Deployment of officers for poll duties has also added to the delays, they said. "Approvals have slowed down in the last one month in Noida and Ghaziabad. There seems to be some fear in the minds of officers," said RK Arora, managing director of Noida-based developer Supertech.
In Gurgaon and Faridabad, which come under the National Capital Region (NCR), nearly 50 residential projects of developers such as Supertech and Assotech have been stalled after the Punjab and Haryana high court prohibited grant of licences until the NCR Planning Board clears the sub-regional plan for these regions. The board was due to meet on March 6 but the meeting did not take place as the Election Commission announced the general election schedule a day before. The model code of conduct comes into force immediately on the declaration of poll dates.
"During election months, at least routine approvals should be given," said Sanjeev Srivastava, managing director of Assotech Developers. He said one of their projects in Faridabad has been stalled even though approvals for it were at an advanced stage. "This is not a new proposal, so should not be affected by the code of conduct." Naini Jayaseelan, member-secretary of the NCR Planning Board, said the board has written to the commission to allow it to hold a meeting to clear the sub-regional plan.
"It is a safe thing to do. It is a most non-controversial thing to do for a bureaucrat. Unfortunately, in a democracy, inaction is never a cause for punishment," said Anckur Srivasttava, chairman of GenReal Property Advisers.
Developers say a two-month delay in getting approvals will mean cost escalation of 5-6% for a project, which is a burden in these troubled times. "Approval process becomes slow around election time, which is not good for the industry. It puts an added cost burden," said JC Sharma, managing director of Sobha DevelopersBSE 0.71 %. Home sales across the country have been slow for the last 12 to 18 months and inventory levels have risen. According to data from property research firm Liases Foras, unsold inventory stood at 709 million square feet (650,000 homes) in the quarter to December. At the current pace of sales, this inventory will require at least 30 months to be sold. Across cities, investors who bought multiple homes in the past are staying away from the market now, as they are unable to exit their previous investments. Home buyers have been shying away from buying homes because of the uncertainty in the job market and the economy in general.
Lalit Kumar Jain, chairman, Confederation of Real Estate Developers Association of India (Credai), said many officials are put on elections duties, which means they are not available for their normal duties. "Even if one official is missing from the whole chain, the entire approval process gets derailed," he said. Jain said in Maharashtra, many files of large realty projects, routinely go to the chief minister's office.