Blame red tape for black money

Probably the first signs of introspection among them, developers saddled with high inventories and shrinking sales over the last 18 months called for reforms to end ‘licence raj.'

Developers have joined the crusade against black money and corruption and said the cost of apartments sold in Mumbai could easily be lower by 25 per cent. For this to happen, a single-window clearance needs to be put in place, instead of the 49 departments and over 150 persons that give approvals at present.

“Any delay at any stage obviously gives rise to greasing of palms as developers are anxious to complete their project,” said Mr Lalit Kumar Jain, National President, Confederation of Real Estate Developers' Association of India.

Cost of approval

A Mumbai developer said on average he pays Rs 3 crore a year for project approvals.

The Maharashtra Chamber of Housing Industry has over 1,000 members involved in developing projects worth over Rs 1 lakh crore in the city and its suburbs.

Mr Jain said that a McKinsey report to the Government of India on the cost of approval pointed out that the cost could constitute up to 40 per cent of the sale value.

Excessive regulation is the prime cause of project delays and innumerable approval/sanctions are fertile breeding grounds for corruption and black money transactions, he said.

The recent White Paper on Black Money presented by the Union Finance Minister, Mr Pranab Mukherjee, unfortunately picks on the real estate and deals with just a couple of issues such as stamp duty as though that is the only cause of the problem.

“We too hate the system that labels us as crooks, cheats and breeders of black money,” he said, and called for realising that various bottlenecks at the Centre and in several States were equally responsible for the menace.

Given the clout many builders command in Mumbai, the call apparently reflects the pent-up frustration of the developer fraternity which had all along taken the considerations paid to various quarters as incidental expenses to keep their businesses flourishing.

The reason: demand was far too high, and stocks too few for buyers to ponder over and choose.

While innumerable reports over the years have pointed out the alleged builder-politician nexus, alongside underworld connections, developers invariably dismissed all queries about them as a figment of imagination.

‘AN AWAKENING'

Experts look at the development as the way forward to better efficiencies.

Mr Pankaj Kapoor, Managing Director of real estate research firm Liases Foras, said it was an “awakening.” The stage was set as the Government is finding it extremely difficult to answer questions on black money. “This could be a pre-emptive action by builders as they must have got a wind of what is likely to follow sooner or later.”

Builders must have realised that there is little in it for them to go along with the powers that be. Returns have to be given, irrespective of the market conditions, besides being solely accountable for offences related to the transactions.

On black money in Mumbai real estate, he said it was widespread with few exceptions. There were instances of listed companies demanding unaccounted money for commercial properties. Even today, many developers in the suburbs such as Mira Road and Kamothe demand 40 per cent of the sale value in unaccounted money, he said.

Market estimates indicate that after 2008, over Rs 2 lakh crore found its way into the sector and there is nowhere to hide when things come to a head, he said.

Another real estate expert said soaring prices had made buying homes unaffordable for most, and this called for cost-cutting to retain margins. And the only way is to part ways with fair-weather friends.

murug@thehindu.co.in

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