Vaidehi Tandel, Junior Fellow, IDFC Institute and Sahil Gandhi, post-doctoral scholar at University of Southern California and Visiting Fellow, Brookings India write in the Hindustan Times on the underlying issues and missing reforms needed to ease housing supply bottlenecks to lower house prices in India. Excerpts:
"However, rigid rules dictating how much can be built and where, along with a veritable regulatory maze in getting essential permits to construct have created frictions in the housing market. Developers have to seek clearances from multiple departments. They have to ensure compliance with a large number of rules and regulations that may be subject to revisions and pay steep official charges and fees. There are serious delays in granting permits and often, if applications are rejected, no clear reasons are given. Speed money and bribes are common in the process leading to cost escalations. Rules governing land use effectively choke supply of land and also drive up land costs.
The creation of the Authority has, to an extent , helped mitigate the issues pertaining to asymmetry of information and curbing cash flow manipulation. However, addressing the symptoms (delays in completion) without resolving the underlying regulatory constraints developers face might further distort supply. The new regulations have been harder on some of the smaller developers who lack the wherewithal to navigate the labyrinth that is getting construction permits on time causing many to exit the market. The Authority has no jurisdiction to hold different government departments to account for withholding or delaying approvals without a valid cause. Without accompanying reforms that ease the complex permissions process and bring about transparency and predictability in rule implementation, the objective of easing housing supply bottlenecks to lower house prices and benefit homebuyers is going to meet with limited success."
Read the full article here.