No place to call home

Every Sunday a group of senior citizens comes together at Pune’s Chittaranjan Vatika garden without fail. “Are we getting our money back?” “How long will it take?” are the questions they keep asking each other. No one knows the answer.

“Many of these old people are on the verge of committing suicide. It’s more than a year and there is no ray of hope. Many of them have succumbed to the shock. Today, even I a feeling frustrated and depressed. I don’t have any answer to their questions,” says Vijay Kumbhar, an activist who is leading the agitation by investors who were allegedly duped by renowned builder DS Kulkarni.

Also, there are some young IT professionals who not only lost money but also their CIBIL score as they have not repaid loans against the property they have invested in. They cannot apply for new jobs as companies question their credit score, thanks to Deepak Sakharam Kulkarni, popularly known as ‘DSK’ who, along with his wife Hemanti, has been accused of defrauding thousands of investors across Maharashtra.

The Economic and Offences Wing (EOW) charge sheet pegs the DSK scam at ₹2,043 crore. Kulkarni and his wife have been lodged at the Yerawada Central Jail since March last year. Their offences pertain to property projects that were conceived in the pre-RERA — Real Estate (Regulation and Development) Act, 2016 — days.

EOW is probing two schemes by DSK. One of them is DSK’s fixed deposit (FD) scheme where he promised substantial gains for depositors while the other one is Aadhi Ghar, Nantar Paise (First get possession of the house, and pay money later). In this scheme DSK took initial deposits from customers and assured payment of the EMIs on the bank loans of the customers till the possession of the property was given to them.

“ He siphoned off money and depositors and investors were left in lurch,” said Kumbhar. There are over 33,000 people who have been affected because of the DSK scam and the majority of them are well-educated middle and upper middle class citizens.

The DSK phenomenon

According to the police, DSK started the Special economic zone (SEZ) project in 2006-07 and bought land where his relatives were first purchasers. The DSK Developers Ltd(DSKDL) then purchased the same land from DSK’s relatives at higher rates. The money was then routed to the personal accounts of DSK, his wife and son. The group floated partnerships and paid interest on deposits to depositors from the money collected from fresh depositors. The group collected deposits and unsecured loans promising a high interest rate, but defaulted on its promise.

DSK has been booked under provisions of the Indian Penal Code, The RBI Act and the Maharashtra Protection of Interest of Depositors Act. But this is not the only scam in the Pune region. Many cases have been registered against big and small builders in Pune. While many of the developers are out on bail, those who invested are struggling for survival. Banks are after them to repay loans for houses which is not in their possession.

“Many investors like me depend on banks to check if the project is legal or illegal. As a common man I believe that banks will offer housing loans only to those projects which have all documents clear. But in recent times banks have offered loans for houses constructed illegally,” says Raja Hinge, who is planning to buy a flat in Pune. One of the relatives of DSK who is himself a developer admitted that there is a nexus between local politicos, some developers and banks. Not surprisingly, massive illegal constructions have sprung in Pune Metropolitan Region (PMR).

"We go by the reputation of the builder. As common citizens, we are not aware about the financial status of the builder or what problems he is facing,” says Varsha Deshpande, a government employee. Varsha has bought a flat as an investment. A few years ago Rishikesh Dongre, working as a manager in a private company, purchased a flat in Pune. He was assured about the legality of the construction as the nationalised bank had cleared his loan proposal and verified all the documents. The builder facilitated the loan proposal and Dongre came to know that the builder had permission to construct only five floors and Dongre’s flat was on the sixth floor. The bank has no answer to offer and Dongre is in a quandary.

The nexus of banks and developers along with local governing bodies make it difficult for buyers to verify the legality of the projects.

“But we had not bought house in any illegal project. We have invested in one of the city’s biggest developer’s projects — the DSK. While we are suffering, what about bank officials and government officials who have facilitated illegality?” ask investors in the DSK projects.

Ramchandra Gohad, a former town planner with the Maharashtra government, insists that the government must have a mechanism in place where accountability is fixed. “Haphazard constructions are coming up in cities. Many small time builders come up like mushrooms and vanish, swindling people. Thousands of investors have been duped by such builders,” he says, adding that stringent laws should be brought to ensure that big and small developers don’t swindle people.

Kolkata scams

It’s a similar story in Kolkata. Sixty-four-year-old Sapna Ghosh, currently residing in Bengaluru, had a very simple wish — settling down in her hometown Kolkata with her husband post retirement. She had booked an HIG apartment in the Teen Kanya project developed by the Bengal Shelter Housing Development Ltd back in 2006. The apartment was then priced at around ₹34 lakh.

Nearly thirteen years later the project is yet to be completed and some of the buyers have moved court against the promoter. Meanwhile, Sapna lost her husband in 2017 even before they could realise their dream of settling in their “little nest”.

Bengal Shelter Housing Development Ltd is a joint venture between Shelter Projects Ltd and West Bengal Housing Board formed in 2003. The Teen Kanya project is situated in Newtown Action Area II, close to VIP road and the IT hub of Salt Lake.

“My husband and I had always dreamt of coming and settling down in Kolkata post retirement. We booked the flat in 2006 and were supposed to get the possession in 2010. I have made almost entire payment except for around ₹1 lakh which is due on getting possession. But the entire project has been stalled. We have moved the court and are eagerly awaiting the decision,” Ghosh told BusinessLine.

Devesh Damani is another homebuyer whose woes are far from over. He had booked a 1,000 sq.ft, 2-bhk apartment in Mounthill Essence at Rajarhat in the eastern fringes of Kolkata in 2013. The promoter had promised delivery by June 2016 with a six months’ extension clause till December 2016.

Damani has already made 95 per cent of the payment for his flat with the help of bank loan. He has been paying almost full EMI for over two years now even while he has still not been able to occupy his property as it is far from being completed.

“There is no electricity, water supply, even the interiors are not complete. I am hit both ways — I am paying for my rental accommodation as well as repaying the loan. The builder has been evading on some pretext or the other….at first he said the project was delayed due to demonetisation, then he came up with some other excuse giving us a false deadline each time and this has been going on,” he says.

Some of the buyers went to the Arbitration Cell of Consumer Court and after one or two hearings the builder sought extension of time line till February 2019. However, even five months after that extended deadline, the project is yet to be completed.

Following the amendment to the Insolvency and Bankruptcy Code (IBC), 2016, allowing home-buyers to be treated as financial creditors, as many as 17 flat owners of Mounthill Essence moved the Kolkata bench of NCLT (National Company Law Tribunal) against the promoter in November 2018. However, it has been close to eight months and the application is yet to be admitted in the NCLT.

According to Abhay Upadhyay, President, Forum for People’s Collective Efforts and Member, Central Advisory Council, RERA, Union Ministry of Housing and Urban Affairs, a whole lot of projects in West Bengal have been going haywire as builders know that the buyers have nowhere to go.

The RERA was introduced to deal with specific issues confronting the real estate sector. However, West Bengal introduced the West Bengal Housing Industry Regulation Act (WBHIRA) and some of its provisions are in conflict with RERA. This puts home-buyers in the State at a disadvantage.

“The WBHIRA is a lot diluted and favours builders and not home-buyers. We have challenged it before the Supreme Court,” he said.

Says Niranjan Hiranandani, President, Naredco and Senior Vice President Assocham: “Real estate sector, as much as any other sector now, is plagued by a negative sentiment. There is a liquidity crunch despite availability of cash. Buyers are putting off purchases because of uncertainty and the low sentiment.”

“Following the NBFC crisis liquidity has been significantly impacted, projects have been hit. But banks are holding on to resources. This has to be channelled to the NBFCs. Also, large NBFCs should be allowed to convert to banks,” Hiranandani says.

Larger forces

Not to be overlooked are the larger forces underlying the present state of affairs. Most of these scam-ridden projects took shape during the 2009-13 years, when speculation in property was in fashion. Buyers ‘invested’ in property, not questioning valuations, while bankers in the case of projects such as Amrapali and Jaypee are reported to have overlooked flaws in the lease arrangement offered by Noida. Even if the project were to be completed in such cases, a default in lease payments would mean that the title of the developer and in turn that of the buyer would be compromised. In fact, Amrapali neither finished the project nor paid up the lease instalments. But as developers used buyers’ finances to channel funds from one project to another, creating any number of companies to befuddle buyers, in the pre-RERA in days, it was all in the hope that prices would perpetually head north.

The bubble burst as the economy slowed down. Those were the days when more than half the metropolitian middle classes buying apartments were doing so for investment, the NRIs included.

Some canny buyers sold out. But there were gullible buyers buying houses for themselves, such as retired senior government servant Onkar Kedia who has paid ₹25 lakh out of ₹37 lakh for his non-existent home in Amrapali. Or for that matter, differently abled Shashi Bala, a retired government doctor in Punjab, who still awaits completion of her home in Jaypee for which she has invested her lifetime’s savings. Will RERA be their saviour?

With inputs by R Balaji , Aarati Krishnan and A Srinivas