Launched in 2003, the World Bank’s Ease of Doing Business Index collects data on the quality and efficiency of business regulations across 11 parameters out of which 10 are used to rank countries according to the relative ease with which business can be conducted. India currently ranks 77 out of the 190 countries studied and has secured itself a place in the top 10 improvers of 2019 owing to a number of reforms. An important regulatory area measured in the report includes ‘Dealing with Construction Permits’. According to government estimates the construction industry in India is expected to grow at an annual average of 6.6% between 2019 and 2028. Furthermore between April 2000 and March 2019 construction development and construction activities accounted for approximately 6% and 3.5% of the total FDI equity inflows. Hence watertight and business friendly construction regulations are not just a matter of public safety but are also essential for the health of the overall economy.
In order to quantify the robustness of construction regulations in a country the World Bank accords equal weightage to four different indicators – number of procedures, time, cost and what it calls the Business Quality Control Index. While the first three indicators measure the efficiency of construction permitting the Quality Control Index measures the safety mechanisms in the construction regulatory system. This index includes but is not limited to the quality control before, during and after construction, liability and insurance regimes, qualification requirements of professionals involved in the construction procedure etc.
While India’s construction permit rank remained relatively steady from 2014 to 2018, last year it witnessed a significant jump of 129 ranks from 181 all the way to 52. A number of regulatory reforms including the introduction of an Online Building Plan Approval System and Common Application Form for the online submission of applications/notifications as well as the receipt of Non Objection Certificates from relevant departments can be credited for the aforementioned improvement. Initiatives like the introduction of a widely accessible Uniform Building Code/By-laws for the entire state/UT, risk based classification and fast track approval of buildings, strict timelines for approvals and refined qualification requirements for professionals not only led to a reduction in the number of procedures, time and cost of obtaining a construction permit but also improved India’s score on the Business Quality Control Index. In Delhi and Mumbai the time taken to obtain a construction permit reduced from 157.5 to 91 and 128.5 to 99 days respectively.
Despite India’s unprecedented jump in construction permit rankings the enforcement of regulations remains complex and asymmetric across the country. Further reforms to streamline and rationalise the regulatory environment in the construction sector are required to boost investment and ensure a high degree of compliance. Currently, both Delhi and Mumbai have a total score of 14 out of 15 in the Business Quality Control Index which equals that of the number one ranking region in ease of dealing with construction permits – Hong Kong, SAR. Be that as it may, India’s performance in the remaining three indicators fairs poorly in comparison to countries like Singapore, Australia, United Kingdom and Hong Kong. This becomes especially evident when a comparison is drawn between the cost incurred in these different countries. The cost of obtaining a construction permit in Mumbai is 6.6% of the value of the warehouse assumed to be constructed according to World Bank methodology while in Delhi the cost falls to 4.2%. These costs are considerably higher as compared to 0.6% in Hong Kong and 1.1% in the UK. In order to address the requirement for Doing Business reforms, the Department for Promotion of Industry and Internal Trade has developed a Business Reform Action Plan which essentially includes a list of reforms across 12 parameters to be implemented by States and Union Territories. According to the 2017-18 BRAP report the state of Maharashtra has implemented all but one of the reforms related to construction permit enablers while Delhi implemented 13 out of the total 30 reforms applicable to it. While these numbers might indicate some progress one has to consider that these results are based solely on the evidence provided by the States/UTs themselves and hence on-ground practices and implementation gaps are not effectively reflected in the BRAP report. In fact according to a survey of 600 firms conducted by the National Council of Applied Economic Research (NCAER) in 2017 only 36.7% firms confirmed that inspections are being carried out jointly by various government authorities while only 32.7% firms confirmed that clear timelines are defined for the approval of applications.
This issue stems from the fact that more often than not construction involves complex and non-standard activities due to which the quality of reforms becomes difficult to assess. Projects involve a multitude of stakeholders – builder, architects, engineers, regulatory bodies, clients etc. Thus, discrepancy in the feedback received from several players can be detrimental to our reformatory efforts. To ensure effective implementation of our reforms there is a need to identify certain key performance indicators and obtain feedback from as many stakeholders as possible. The BRAP report considers both state and industry feedback however a greater weightage is accorded to state feedback. The Ease of Doing Business report data is obtained from feedback given by relevant professionals. Analyzing various perspectives to ensure that the effect of reforms is felt on ground is necessary to affect change. Apart from fixing the kinks in implementation India requires major structural reforms as well. A basic idea of the reforms required can be understood by studying the best regulatory practices in construction permitting across the world. Presently, separate inspections conducted by various departments add a considerable number of days to India’s permitting procedures. While Delhi is yet to attempt the streamlining of superfluous inspections, the state of Maharashtra has mandated that departments coordinate a joint site visit for approval of buildings. To coordinate this an officer of the rank of head of the department of Planning/Engineering section will be appointed. Although this is a step forward the benefits of joint site inspections are not being enjoyed to their fullest due to the lack of a separate coordinating body where builders can submit applications/notifications and the request for a final joint inspection.
A One Stop Center similar to the one implemented in Hong Kong; Taiwan & Malaysia can help address this gap. The One Stop Center in Hong Kong brings together six local departments along with two private utility companies (telephone line and electricity supply) under one roof. This centralized office eliminates the need to apply for inspections separately and leads to a manifold improvement in the degree of coordination between departments and the builder. For example, in Hong Kong, the following certificates can be obtained together through the One Stop Centre after the final inspection: (a) Fire Services Certificate (b)Occupation Permit; (c) Certificate of Compliance; and (d) Water Supply Certificate. Processes that create significant bottlenecks in the procedure, such as applying for water supply in Delhi (34 days), will become significantly faster. If implemented in India, this initiative could lead to a gargantuan improvement in India’s Dealing with Construction Permits ranking.
Advancing technology in the construction sector not only in terms of building equipment but also in terms of cutting-edge software design solutions has helped us simplify procedures and create cost and time efficiencies. The development and success of information technology solutions like Business Information Modeling in countries like Singapore and Australia provide a strong case for the potential of technology to dramatically streamline the building design process. These BIM softwares provide a platform to store important project data digitally and in its simplest form this information is a three dimensional representation of the building design along with its hidden specifications. The DesignCheck program implemented in Australia is capable of automating the verification of building code compliance. Basic code compliance tests can be conducted automatically through the software. This data can then be directly sent to Building Authorities thereby allowing those in charge of code compliance to focus on high risk aspects.
On similar lines, Singapore’s online building approval platform, CORENET is a leading example of how technology can improve not just the agility but also the quality of construction approvals. Like CORENET, India’s Common Application Form and Online Building Plan Approval System serves the purpose of eliminating the duplication of information, removing redundant procedures and minimising physical touchpoints. However immense scope for improvement still exists when it comes to the development of computer-aided design (CAD) softwares. Singapore took several measures to not only standardize CAD symbols, layers and data but the Building Control Department also undertook the mammoth task of training and providing technical support to both public and private stakeholders.
Another major reform to be considered includes the involvement of the private sector players in construction regulation. Initially undertaken by high income economies – such as Australia, Japan and the United Kingdom – this model of competitive public and private third party reviews is slowly but surely gaining traction in lower-middle-income and upper-middle-income economies as well due to the undeniable efficiencies it brings. In the UK, builders are free to choose between the local authorities and Approved Inspectors from the private sector. Private inspectors often provide expert advice on other aspects of construction as well such as fire safety. This innovative and future forward practice has introduced competition in a market where local bodies earlier held monopolies protected by law. As is usually the case with social Darwinism – greater competition leads to greater productivity. This forces local authorities to drive down their costs and adopt a more client oriented approach in order to prevent the total erosion of their revenue. What makes this approach especially effective in the Ease of Doing Business context is that as per Doing Business methodology if a private inspection firm is hired then only one procedure is recorded for the builder while subsequent inspections are not recorded. It should hence come as no surprise that the number of procedures required for obtaining a construction permit in Australia is eleven while in United Kingdom it is merely nine. Local bodies in the UK now perform two key functions – filing AI inspection reports and documents and serving as a backstop for when AI is not used or is unava