Development authorities breeding ground for corruption

The case of corruption involving a senior official of the Noida authority points to a bigger systemic malaise

He is reported to have owned diamonds worth Rs 100 crore. Taken together with the cash seized during income tax raids and the values of properties he owned, Yadav Singh, a suspended senior Noida authority official, is estimated to be one of the richest persons in Uttar Pradesh.

But he is not alone in amassing wealth many times more than the known sources of income while working for a development authority. There have been several instances of officials of development authorities getting involved in major scams.

Why have these development authorities turned into corruption promotion authorities? Not very hard to understand if you take a look at the regulatory regime they preside over.

They operate with a set of rules that have become archaic and are reminiscent of pre-liberalisation period's licence-permit raj.

A case in point is how construction regulation, one of three main functions of development authorities, works in various parts of the country.

A construction permit requires, among others, mining licence, tree cutting approval, borewell registration certificate, no-objection certificate to operate a genset, change of land use approval and a microwave licence.

Then there are approvals required from Airports Authority of India, railways ministry, National Highways Authority of India, environment ministry, ministry of defence, Pollution Control Board and Coastal Zone Management Authority. Incidentally, some developers this reporter spoke to had no clue about what a microwave licence stood for.

There are, on an average, 34 permissions required only to obtain a construction permit (in some cases more than 50), which takes at least 227 days, according to the 2013 World Bank report on ease of doing business.

No wonder the report puts India at 182nd position among 185 countries on the ease of issuing construction permits.

In comparison, it takes all of 26 days in Singapore, 67 days in Hong Kong and 69 days in Mexico to obtain such a permit.

"It is not that clearances are not required in other countries. But elsewhere the onus is on government officials to give time-bound permission," says Anshuman Magazine, chairman and managing director (India) of real estate services firm CB Richard Ellis.

"We remain so preoccupied with obtaining multiple clearances and paying multiple taxes that there is very little time left for focusing on improving quality of construction, timely delivery and research and development," observes Navin M Raheja, chairman, National Real Estate Development Council.

According to a KPMG report, the lengthy process of obtaining permits leads to cost escalation of 20-30 per cent. And, multiplicity of taxes account for 30-35 of total housing cost.

This reporter spoke to scores of officials working for private developers in the National Capital Region and the sense one gets is that many of the clearances come at a cost.

"In Noida or Ghaziabad, you can get a mining licence only if you approach authorities through a syndicate. The deal is to forego your rights over sand that comes out of digging. Deal makers make crores of rupees by selling that sand. But that is a small price you will have to pay to cross the first hurdle," a senior official of a Ghaziabad-based developer told this reporter. He and scores of other officials who gave inputs for this story refused to be identified, fearing also the wrath of officials working for development authorities. "The officers who give clearances are the ones who do inspection also. We cannot afford to annoy them in any way," he added.

Obtaining a construction permit is just the beginning of the story. Much bigger hurdles, requiring constant "dealing" with officials of development authorities follow, say officials associated with private developers.

"The toughest challenge for all developers is to follow building bylaws. They were written some 30-40 years ago. If they are followed in letter and spirit now, all developers will lose money. So, they look for entering into some kind of a deal with officials. Bigger the size of the deal, the greater the flexibility of builders to vary from bye-laws," said a builder who has projects in Ghaziabad and Greater Noida. He requested not to be identified.

A 2013 report of the committee on streamlining approval procedures for real estate projects constituted by the ministry of housing and urban poverty alleviation says: "Some stipulations (of bylaws) are so complex that even experienced technical person or architect find them hard to understand and in the process, tend to violate the laws. Some areas of building bye-laws provide scope for ambiguity, which brings in lot of discretion power vested to the authority/officer, who can play with the applicants by rejecting without proper reason or cause delays. This paves way for collusion and corruption."

"You can get a floor added to the approved plan, floor area ratio (FAR) wrongly calculated, the leeway to convert parking slots into store rooms or converting green spaces into parking slots-officials either have the power to approve them or just overlook them if you keep them happy. All this happens because our bye-laws have become archaic," added the developer quoted earlier. He pointed out that obtaining occupancy and completion certificates is another area where officials of development authorities have chance to cut "deals".

It is not that authorities are unaware of all these flaws in the regulatory regime. The committee had observed that "most of the sanction and certification processes in building permission lack transparency and are ridden with systemic corruption at various levels.

The decision-making process of sanction/rejection is not transparent and can be arbitrary. The deficiencies in the system give enough room for foul play by fraudulent persons operating within the system, harassing applicants/ builders for 'payments'. Deficiencies in inspection and certification of building completion (compulsory signing by official concerned) also promote corruption and/ or collusion."

Collusion does take place and the Yadav Singh episode is a crude reminder of that.