Parekh blasts red tape in green guise
Mumbai: Hes a pioneer of Indias housing finance boom. Hes the troubleshooter many finance ministers have turned to, regardless of which political formation is in office. And hes had a huge influence on the shape of Indias financial structure. When HDFC chairman Deepak Parekh speaks on an issue, policymakers usually listen. Which is why his hard-hitting letter to HDFC shareholdersin which he fulminates against delays due to multiple clearances, slams developers for not differentiating between super built-up and carpet (actual liveable) space and calls for an independent regulator for the housing sectorshould make waves.
The letteran advance copy of which is in TOIs possessioncalls for simplifying land acquisition. I fail to understand why the government is propagating red tape under the guise of being green, writes Parekh. Why should a residential project, school or hospital be subject to similar environmental rigours as a toxin-emitting factory? Environmental concerns are extremely valid, but the present procedures involving multi-tiered approvals from various bodies and the mandatory no objection public hearings calls for an urgent reassessment.
Calling for a single-window, timebound approval mechanism, Parekh points out, Even for a residential project, a developer requires over 57 approvals. This often takes 12 to 15 months, resulting in significant cost and time overruns, which is passed on to the hapless purchaser. It is not unusual for developers to have to resort to beg, borrow and pay to obtain approvals. If housing for all has been accorded national priority, then is it not in the governments interest to expedite rather than delay housing projects?
Mumbai: Even as HDFC chairman Deepak Parekh fulminates about bureaucratic processes and approval delays, the senior statesman of Indias housing industry believes it needs an independent regulator to protect buyers.
Body to protect home buyers must: Parekh
Mumbai: Even as HDFC chairman Deepak Parekh fulminates about bureaucratic processes and approval delays, the senior statesman of Indias housing industry believes it needs an independent regulator to protect buyers.
Just about anyone today can become a developer or broker, he points out. Developers rarely offer any warranty for the flats and in case of disputes, consumers have only the consumer or civil courts as recourseboth of which may take ages before a case can even come up for hearing. Delay in handing over possession of the property has become the order of the day. The developer community is free from any liability in case of delays. From the consumers perspective, a house is the single largest investment a person makes in his or her lifetime. It is only fair that there is some effective mechanism that can take care of grievances and ensure basic consumer protection, he writes in his letter to HDFC shareholders.
Parekh is also critical of developers who misguide buyers by selling on the basis of super built up area, without clearly mentioning how much is the carpet (internal wall-towall) space. There are instances where the difference between the carpet and super built-up area is as high as 50%. Bifurcating the carpet area and common amenities increases transparency in the transaction. Ironically, though some states have legislation for flats to be sold on the basis of carpet area, what is lacking is enforcement.
Changing Cities
Changing Cities
Warning of a looming urban housing crunch, Parekh points out that over 900 million Indians will be living in cities in another four decadesa threefold increase from the present 300 million urban dwellers.
Calling for urgent policy intervention, he suggests that one way to provide affordable housing could be to encourage developers to build rental accommodation. He also suggests that cases registered in court under the Urban Land (Ceiling and Regulation) Act, 1976which was repealed in Maharashtra last yearthat are still pending in court should be withdrawn or dismissed immediately.
Parekh also laments that even as housing boards are flush with funds, auctioning land to the highest bidder, one does not see this money being ploughed back into housing and infrastructure facilities. If all land transactions are driven by maximizing profits, then socially relevant institutions like schools, vocational training centres or primary health care centres will constantly be muscled out by vested commercial interests. I have come to believe that if we have to change the face of our cities for a better tomorrow, we need to find solutions, perhaps not from our head but from our heart, he writes.
Sub-Prime Crisis
Sub-Prime Crisis
The letter also dwells on the sub-prime crisis, which has resulted in banks and financial institutions collectively reporting almost $300 billion in write-downs and credit losses. Parekh says the lesson for home loan borrowers is that what works best are plain vanilla loan products and not exotic structures. In most cases, borrowers rarely understand the risks involved in complex products and invariably end up being stretched beyond their means.
While not everyone may take kindly to his plainspeak, theres no doubt that his home truths could spark an interesting debate.
Deepak Parekh | CHAIRMAN, HDFC