The government’s seeking to take over embattled real estate developer Unitech would send a strong message to the industry, developers said.
“It is a wake-up call for all corporates to not do business at the cost of customers, shareholders and vendors,” said J C Sharma, vice-chairman and managing director of Bengaluru-based realty developer Sobha.
“It will send a message to the industry that if you mismanage your company you will lose it,” said an executive with a Delhi-based real estate company. With court cases and government policies like RERA there was now a perception that real estate was becoming a buyer’s market, the executive added.
Niranjan Hiranandani, chairman and managing director of Hiranandani Communities, said a government takeover could be justified if there was fraud involved but not because of the failure of the company.
Other developers said the move was unfair. “How can the government take over the company? You put the promoters in jail and then talk about taking over the company. It does not add up,” said office bearer of Credai, an industry lobby group.
Around 19,000 home buyers are awaiting possession of Unitech flats and houses. The company has defaulted on payment of Rs 600 crore to over 15,000 small depositors. It has also defaulted on Rs 880 crore of loans.
Besides Unitech, real estate companies Jaypee Infratech and Amrapali face insolvency proceedings in the National Company Law Tribunal (NCLT). In November, the Supreme Court directed the directors of Jaiprakash Associates, the parent company of Jaypee Infratech, not to alienate personal properties and asked the company to pay up Rs 275 crore by December.
The NCLT Allahabad bench admitted the Jaypee Infratech case on August 10 after IDBI Bank referred the company for defaulting on debts of Rs 526.11 crore. Close to 32,000 homebuyers in various Jaypee projects are yet to receive possession of their apartments.
The JSW group, Vedanta, the Lodha group and Deutsche Bank are among 18 parties that have shown interest in buying Jaypee Infratech, according to reports.
Similarly, Puravankara and Godrej Properties are among six companies that have expressed interest in submitting resolution plans for Amrapali Silicon City, a group firm of the debt-ridden developer Amrapali.
In September, the NCLT had admitted a petition by Bank of Baroda against Amrapali Silicon City over a loan default. An interim resolution professional was appointed to conduct proceedings in accordance with the Insolvency and Bankruptcy Code.
Amrapali Silicon City is developing a housing project in Sector 76, Noida, on over 43.7 acres.
