Unitech Case: Wake-up Call For Builders
Real estate developers see the jail (and later bail) to Unitech's top management in a cheating case as a wake-up call for the community
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Real estate developers see the jail (and later bail) to Unitech's top management in a cheating case as a wakeup call for the community. However, Unitech has been facing trouble in Delhi NCR having to respond to multiple FIRs and cases lodged against it on various counts including allegation of cheating.
However, after spending one night in Tihar Jail (before securing bail) in a cheating case, life has virtually come a full circle for the promoters of real estate firm Unitech. Unitech Ltd Chairman Ramesh Chandra, Managing Directors Sanjay Chandra and Ajay Chandra and Director Minoti Bahri were sent to judicial custody earlier in the week in a case based on a complaint filed by two people who had booked a property in Habitat Apartments in Greater Noida developed by Unitech, which is yet to be delivered despite considerable delay.
Builders based in Delhi NCR are not surprised at the incident as virtually most of them are facing similar challenges - not being able to deliver projects launched over three to five years ago, and sometimes ever before that. Officially, most of the builders that BW | Businessworld spoke to seemed to be divided on this incident. A Gurgaon-based builder said: "It is not about one builder or another. There are systemic issues involved in various cases. Builders not being able to complete projects should be looked into in details by the authorities too. I am not aware of the details of this particular case though but in general the market is in a bad shape."
Unitech bosses submitted to the court that it was due to financial constraints and circumstances beyond their control that they were not able to make the payment to the complainant, an argument that holds true for several other builders too.
A quick read of the latest Annual Report of Unitech for 2014-15 shows that the promoters had forewarned the shareholders about cash crunch where Chandra had said that successful delivery of projects will start a "virtuous cycle of cash generation" facilitating reduction of debt on the balance sheet in the medium term. "So, in the immediate future, for Unitech I expect revenue growth but not much of reduction in consolidated debt," he said in the report. As per the same report, Unitech's debt was estimated at Rs 4,247 crore at the end of March 2015.
Getamber Anand, CMD of Noida-based ATS Group and President of CREDAI, the apex body of developers said a clear message has gone to all builders that law will catch up unless promises made to home buyers are kept well within the time-frame.
However, Unitech has been regularly been pulled up across courts in the Delhi NCR. So for Unitech, this was not the first time that FIRs was registered on the charges of cheating.
In February 2015, a Haryana cabinet minister had directed the police to probe into the issue of Unitech allegedly cheating its buyers. The case pertained to Unitech's The Residences project in Sector 33 Gurgaon which was launched in May 2009 in which the builder had to deliver 1,300 homes by December 2011. However, as per the reports in media, Unitech could not deliver the project as per the delivery schedule. The complaints were filed by unsatisfied customers who had claimed that the company had collected over Rs 500 crore from the project after it launch.
Then in August 2014, Gurgaon court had directed the police to lodge a First Information Report (FIR) against three directors of Unitech Realty Private Limited in connection with a group housing project in Sector 47. The builder had allegedly kept the flat holders in the dark about the fact that the project site had no access road. The charges against the company included cheating among other section of the Indian Penal Code. As per news reports back then, this Rs 400 crore project was launched in 2008 and had 896 apartments along with 158 units for the Economically Weaker Section, a club and a nursery school. The allegation against the company was that despite written commitment to handover the possession of apartments within 30 months, the project was far from completion. The original delivery date was September 2011, the report said.
Then in September 2015 the Additional Chief Metropolitan Magistrate of the capital had pulled up the Delhi Police for what it called an "eyewash" investigation on the FIR against Unitech Ltd that had launched a project in Sector-70 Gurgaon. This particular project involved building a housing complex by 2014. The complainant alleged that the firm had collected a sum of around Rs 500 crore from the investors as well as the bank and not even a single penny of the amount was utilised towards fulfilling the contractual obligation and alleged that the amount was misappropriated, the report said.
"Builders be aware, the home buyer is frustrated and is hell bent on punishing us unless things improve quickly," says a Noida-based developer.