How Narendra Modi Govt Can Make It Easy To Invest In Real Estate In India
In the World Bank's 'Ease of doing business index', India's performance has been dismal. In the 2015 Index, India's rank was 142 in a list of 189 countries. One of the central agendas of the Narendra Modi government, as publicly announced often, is to improve India's rank to 50. The Department of Industrial Policy and Promotion (DIPP) recently announced its plan to rank Indian states based on ease of doing business, with the help of World Bank and other agencies. Onno Ruhl, World Bank's country director for India, said it would take just three years for India to improve its ranking because the underlying procedures to make a country business-friendly are not complex.
Investors in real estate in India have always maintained that it is very difficult to carry out their operations in India. The constraints the construction industry faces are significant. The construction industry is the second largest employer in India, next to agriculture. In rankings for 'Dealing with Construction Permits', India's rank in ease of doing business is 184. In 'Enforcing Contracts', India's rank is 186. In resolving commercial disputes, India's position is 188, and in 'registering property', it is 121.
But, this is not a sufficient reason to lose hope because India's performance in all these parameters has improved over the years. India's rank fell because other countries improved their performance greatly. It is reasonable to assume that India can emulate more prosperous countries in future and make it easier for real estate industry to flourish by facilitating easier processes for investing in India.
How should the government go about it? The government, for instance, should cut down the number of procedures businessmen have to go through to get a construction permit. For instance, in Mumbai, to obtain commencement certificate from the building proposal office and to pay development charges, it costs Rs. 836,100 on an average. In India, the process can take many months, while in Singapore it takes 26 days. To obtain “intimation of disapproval” (building permit) from the building proposal office, it takes around two months. The government stipulates that builders must get “No Objection” certificate from many authorities. This is a costly procedure.
Developers have been urging the government to remove building height restrictions and ensure that a single body should issue construction permits. Without a single body system which reviews proposals over the internet, it would be difficult to attract more foreign investments in the realty sector. It takes 1,420 days on an average to enforce a contract in India. The government can speed up the process by using internet-based technology. This would not just make the process faster, it would also increase transparency.
The government could also allow private arbitration to flourish because court room procedures could go on for decades in India. Certain government departments can work toward an out of court settlement too. Registering property in India is time consuming and costly. Even though India's rank in registering property is 121, local municipalities could allow people to register their property online, and cut down the cost of doing so. These measures are by no means sufficient to make India business friendly. But this would do a great deal more good than vague, grand schemes that governments usually promise.