Thursday, 13 November 2014

Harass ! Hound ! Halt ! The saga of construction permits in India !

Aditya Builders (name changed), a small time construction company, routinely executes construction contracts for medium sized builders and small factories in and around a southern metro. The proprietor, Adityaram, a trained engineer with more than two decades of experience as a construction engineer, has set his sights high. He is credited to go about his work passionately and was widely appreciated by his clients who have been with him for several years now. However being a very competitive business that construction is, the capital formation in his books was modest.

At some point of time, a small piece of land in a suburban area was offered to him for sale by a known person. Here was an opportunity to go higher up in the value chain of construction business, he thought and finally decided to take the plunge. Being capital starved he had to borrow almost 70% of the property value from banks and private lenders.

Adityaram planned to develop the property as a small apartment building and was enthusiastic as it was a major step of forward integration for him.

He did not know what really lay ahead for him!

He applied for transfer of patta in his name as it was a technical necessity. The process of issue of patta has been computerized and what should happen as a routine measure, would take about two months, he was told. The Revenue Dept. staff are busy on flood relief duties, they reasoned. Of-course things can speed up but some ‘expenses’ will be there, he learnt . Aditya was adamant he wouldn’t pay.

Two months passed by and after repeated visits and endless waits in the dirty corridors of the Tashildar office, he got his patta that too without any speed money! ; A small victory, he told himself.

Next was the issue of getting approvals for construction. He submitted his plans online through a licensed surveyor; ideally the plans should get cleared within 72 hours, but there was a software glitch, he was told. After some fifteen days, the online clearance was received. Armed with this and other property documents he sent in his application with relevant attachments and prescribed fee.

After a long wait Aditya approached the concerned officer to know the status of the application. He realized even though his papers were in order and his drawings have been pre-approved, there were still ‘demands’ to be met. The Executive Engineer he met ‘briefed’ him about the ‘going rates’ for such approvals. What happens if someone doesn’t pay, Aditya ventured to ask. Well, things get delayed; officers don’t take much interest! After all they have lots of other work and your work gets de-prioritized, the EE said in a thoughtful and compassionate tone, as if he was taking pains to help Aditya. See, you have invested money and a delay of even one month can set you back by way of lost interest on locked up capital; besides material prices are going up rapidly and as a  builder you would be better off not minding the small payouts! After all take this  as just a small additional layer of cost which gets offset by the savings in time! The EE was now talking corporate finance!!.

It was the time to make up his mind! Aditya rose and said in a firm tone he wouldn’t pay up. Nor would he countenance unnecessary delays! He added he will take up the matter with higher ups if necessary. The EE was no longer interested in him and buried himself in other files, as if saying Aditya could go out.

In the next few days Aditya thought dispassionately and shot out couple of letters under RTI Act. The replies, mercifully, were received in fifteen days. Studying them he learnt that the officials are obliged to clear the files for new construction projects of the category which Aditya applied for, within a maximum of 14 days and if they were rejecting a proposal they need to communicate to the proposer the detailed reasons.Given the on-line pre-approval of plans which Aditya had already completed, the officials had to perforce come out with very good reasons to reject his proposal, Aditya reasoned.

Next he shot out a detailed letter to the approving authority asking for reasons for the delay in his case and why the laid down guidelines are not being adhered to. He would approach the court for compensation for the delays caused by the officers concerned and they would be asked to compensate him in their personal capacity besides claiming damages from the civic body, his letter added for good measure.

A week passed and then he got a call from the civic body and was told his approvals are ready.

He reckoned an additional three months time had passed beyond the ‘normal time’ period for such approvals.

At long last he commenced the work at site and the construction gathered steam. One fine morning Aditya was asked to meet the local councilor. Aditya, sensing trouble yet again, just ignored it. There were repeated calls and he went on stonewalling them. Several warnings, some subtle and some not so subtle, came his way, but he stood his ground. How councilors can manage their wards if people who run their business there do not contribute, he was asked to clarify!. The present councilor doesn’t take no for an answer, was another friendly advice from one of his sidekicks!; Later he would realize had he met the councilor the demand would have been approximately INR one lac per apartment.

When he had planned the first level roof casting work, he had to store lot of materials on part of the road as the site was quite small and the materials had to be necessarily kept on the road. Aditya was taking due care to avoid traffic blocks due to material stack. Just as the labour team arrived to start the work, there was a group of officials from the local body who said he was blocking traffic and the work could not proceed. They had brought some policemen to the site who too commanded Aditya to stop.

A livid Aditya decided to take the bull by its horns ! He asked the officials if they had stopped similar works elsewhere and there are atleast a dozen such construction works going on within a kilometer range, he pointed out. Why is this selectivism, he demanded to know. He asked them to give the order in writing and said he is prepared to pay the applicable fine for such temporary disruption to traffic. He warned them he would approach the court and ensure that he was being targeted and singled out. After some time the team from local body lost its steam and went away saying he would be penalized for the traffic disruption. The police team booked a case and went away. After an hour of stoppage, the work resumed.

There were similar issues at the time of giving power, water and sewer connections and he had to endure substantial pressure, strain and delays at every stage.

Finally when the work got finished, he estimated he had saved nearly INR 10 lacs by his spirited approach. This was nearly 10% of the cost of the construction and added to his bottom line. He also worked out the additional interest cost on account of loss of time was nearly 30% more than the notional savings! .

But he could not resist feeling a moral victory of sorts!.

If this is the pressure a developer has to face in a small project (which happens in almost all the projects) the readers can imagine the kind of demands a major project proponent will countenance!! And the costs of such blackmail and rank illegality are being borne by the developers and users of the project ultimately!

Multiply it million times, you get the effect it has on the overall economy by way of loss of productivity, escalation of costs, wastage of resources, undue and unjust enrichment and loss of revenue for the exchequer!

Let us start resisting illegal demands of this sort in our own small ways and soon it will form a crescendo!

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