Following HDFC chief Deepak Parekh's remarks regarding environmental clearances causing delays and subsequent cost overruns in housing projects, the Confederation of Real Estate Development Association of India (CREDAI) has quantified the impact. According to CREDAI Secretary Rohit Raj Modi, these environmental processes contribute at least 10% to 15% to the overall costs, a burden which ultimately gets transferred to consumers.
CREDAI Chairman Kumar Gera echoed this sentiment, asserting that the requirement for environmental clearances leads to an increase in housing costs for builders, countering the government’s aim to make housing accessible to all citizens.
For any housing projects encompassing areas greater than 20,000 square meters, applications for environmental clearance must be submitted to the Ministry of Environment and Forest (MOEF). In contrast, those projects under 150,000 square meters can be submitted to state committees, if available, otherwise they follow the central committee's path in Delhi for processing.
National Real Estate Development Council (NAREDCO) President Rohtas Goel, who also serves as the CMD for Omaxe Ltd, asserted that the necessity for environmental clearances within city development zones—where master plans have already been established—proves to be unwarranted and merely prolongs project completions.
Developers are typically obliged to generate extensive reports on environmental impact assessments (EIA), alongside an Environmental Management Plan, and complete a lengthy questionnaire of roughly 150 queries. These tasks are required to be finalized within 60 days of their initiation by committees. While this time frame seems reasonable, lengthy queues often deter efficiency due to the lack of state committees in many areas, resulting in most submissions being directed to Delhi.
Developers frequently encounter a range of common issues regarding environmental clearances, including the overuse of groundwater, inadequate sewage treatment facilities, insufficient municipal connections, poor power consumption, obstruction of existing water catchments, noise pollution during construction, safety measures at construction sites, availability of parking, preservation of common areas and green spaces, and systems for solid waste management.
Such concerns, developers contend, are already examined and accounted for during initial town planning. Consequently, they question the need to repeat these assessments. Pradip Jain, CMD of Parsvnath Developers and president of CREDAI’s NCR chapter, remarked that gaining all essential environmental clearances may take between six months and a year, with numerous projects awaiting their chance to present before the committee, which only commences the appraisal process thereafter.
Mr. Jain noted the absurdity of current practices, highlighting that even developers who have won land auctions in established townships like Noida and Gurgaon still have to seek further clearances from the MOEF for their projects.
Mr. Gera reiterated that once a master plan is devised, environmental factors are inherently factored in by town planners. Thus, obtaining MOEF permits only duplicates existing processes, which further inflates costs.
Mr. Modi, also at the helm of Ashiana Developers, indicated that a delay of just one year due to environmental clearances adds at least 10% to 15% to development costs. This is primarily because developers can only pursue clearances post land acquisition, with land often comprising around 60% of the total project costs, leading to an average increase in interest costs—averaging 18%—over the delay period.
While Mr. Gera acknowledged that enforcing environmental clearances is essential for new townships that necessitate land use changes, he emphasized that all clearances should ideally be granted within a month. The urban development ministry has proposed measures to streamline these environmental processes, aiming for a one-month timeline for issuing clearances. However, such guidelines remain unimplemented, leaving home buyers to bear the financial implications of bureaucratic inefficiencies.