1. Said challenges should reflect the work done on a day to day basis, not something completely disconnected from the company as a whole
Google's interview challenges should be very different from say, a local web development agency's interview challenges. I've seen too many companies where either the challenge was way too difficult/complex for the job on offer (build a complex modern app from scratch for a junior/graduate level role, or solve a bunch of leetcode tests and HackerRank puzzles for a WordPress agency job), or where it was far too simple (I remember at least one software engineering interview for a React focused role where the challenge could be solved without writing a single line of JavaScript).
2. The requirements and environment should match a realistic working day
When was the last time you had no access to the internet, no access to an offline IDE, no access to premade software, no one to help, a boss standing screaming at you over your shoulder and a camera tracking your every eye movement in case you're 'cheating'?
Probably never right? Unless your company environment is a dystopian hellhole, this is probably not your typical set of working conditions. Don't expect interviewees to work under them, they're not kids in school doing an exam.
3. And that said projects should be somewhat realistic in terms of scope
Most people aren't coding a new website/app from the ground up every day/week. Expecting someone to create that in a few hours feels incredibly unrealistic, and an incredibly poor method of judging someone's skills in the role.