Wednesday, October 10, 2012

Don’t bribe corrupt officials, says CREDAI

  • Developers apex body launches war in corruption
  •  “One day, we will all say: Ataa mazhi satakli!”, says Lalit Kumar Jain
  • “We shall win respect for our profession”
  • Onus on GenX developers
  • Determined drive for realty reforms launched at Barcelona convention

Launching an all out war on corruption, developers’ apex body CREDAI has called upon its 10,000-strong members to stop paying bribes to officials for getting clearances.

“We have had enough of this charges that builders breed corruption,” said CREDAI national President Mr. Lalit Kumar Jain disclosing that he had conducted a survey among the developer community on saying flatly “No” to corruption. Many members positively reacted and some said: “Together, we shall”

One day all of you will say: Ataa Mazhai Satakli...
He was addressing CREDAI’s National Convention at Barcelona, recently. CREDAI hosts two conventions annually, one in India and the other abroad to go in search of learning from developments in a foreign country.

Drawing inspiration from Bollywood blockbuster and Ajay Devgan starrer “Singham”, Mr Jain told his fellow developers: “One day, all of you will say Ataa Maazhi Satakli (loosely translated, Now I am losing my temper!)” when someone asks you for money for doing favours.”

He recalled that there was a lot of skepticism when he embarked on “Mission Transparency” for the developer community and the government 18 months ago. But today, the mission has been well accepted, judging from the fact that a majority of developers across the country have accepted the CREDAI code of conduct for themselves and the various state and city units are setting up consumer grievance cells to proactively settle disputes out of court.

Similarly, he said, one day all developers will say no to corruption and the day is not far off. Mr. Jain said the onus to fight corruption is particularly much more on the young developers than the older generations.

He pointed out that CREDAI and its state chapters untiring efforts post the last Singapore NATCON, governments in Katrnatakla, Andhra Pradesh and Chattisgarh have started moving to set up single window system for building clearances. Various governments are now discussing the comprehensive check-list presented by CREDAI.
Quoting a McKinsey report he said with the population crossing 1.2 billion in 2011, the total shortage of dwelling units in urban areas will be 38 million units by 2030 in comparison to 24.71 million in 2007.  

The economy will have to build between 700 million and 900 million square meters of residential and commercial space a year in order to meet urban demand. This translates into adding two Mumbai size cities or one Shanghai, each year. It is also anticipated that India will add another 215 million people to its cities by 2025, he said.

Mr. Jain pointed out that there was a strong correlation between urbanisation and economic development. Cities presently contribute approximately 60% to the GDP, which is expected to increase to 75% by 2030 and 85% BY 2050.

Starting that the role of cities is to provide mass scale employment and, in turn, revenues to the state. “We require a whopping 2.2 trillion USD to meet the challenge of urbanization,” he said.

Real estate in India is the second most important sector after agriculture in terms of employment and role in the economy, yet there is no adequate focus on housing. Though the sector has evolved to a large extent over the past 15-16 years, the road ahead is long and not an easy one, he said.

Comparing with the global scenario, Mr Jain said in the US, even during the slowdown period, the total lending to commercial real estate was 25% and in Brazil it as 22%. But in India its woefully low at 2.8%. The mortgage-to-GDP ratio globally is 15 to 30% and in India it is just 9%.

Another major impediment for the sector is the risk weightage of 1.25 times given by banks for the safest sector like real estate. The customer has to shell out 40 to 45% as self contribution since RBI doesn’t allow stamp duty, and other taxes on flat purchase and allows lending up to 70% of the cost.

Moreover, home buyers have to pay 30 TO 36% in taxes like VAT, service tax, stamp duty, premiums and development charges, after accounting for 30% for income tax. Complex legislations, a plethora of state-level laws and high transaction costs have translated into impediments to growth of this sector. Adding to them are transaction delays and lengthy judicial procedures.

“We take 18 to 36 months from change of land use or CLU to commencement of work and these delays contribute up to 40% of the sale price. I have heard stories of developers’ exploitation and how the corruption has reached its pinnacle,” he said.

The war on corruption, he said, will be most effective if all CREDAI chapters fight it out with conviction. Developers should gear up to resist all kinds of exploitation and demands for bribes, expose bribe seekers and even move courts with writ petitions and complaints.

Stating that unity is strength, Mr Jain called upon fellow developers to stand by honest developers and support those who may fall victims to the corrupt system. “Then you will see what happens (in terms of results)”.  

He asked the developers not to be silent watchers of the corrupt system and exploitation and not to back-stab competitors.

On part of the government, he explained that there is an immediate need to implement administrative reforms to check the menace of corruption and said we had enough of committees after committees. “Now is the time for the government to act at once,” he added.