New Delhi: When the National Consumer Disputes Redressal Commission (NCDRC), in a first-of-its-kind ruling, sentenced the managing director and directors of the multi-city real estate company, Parsvnath Developers, to three years in prison for disregarding its 2019 order to issue refunds to home buyers, it seemed like the end of a long dark tunnel. Scores of middle-class families had been left in the lurch since 2007.
They had little to hold on to till then, except the long-forgotten promise that their dream homes in Greater Noida, one of Delhi’s swanky suburbs in Uttar Pradesh, within three years — that is, by 2010.
The refunds were to come with an interest of 12 per cent a year since the date of payment, which worked out to Rs 1.55 crore per buyer, but the company went in appeal to the Supreme Court, which, while upholding the NCDRC ruling, gave it a breather of three months, starting from 9 February.
The flats at Parsvnath Privilege, a residential cluster whose USP is its proximity to the upcoming Jewar International Airport, had been booked between 2007 and 2009, and cost the buyers Rs 50-65 lakh.
Today, 12 years after the last booking had been made, just three out of the 20 residential towers — that is, 126 out of the total 958 promised flats — stand completed and ready for occupation. And the company has been maintaining a deafening silence on the remaining 832 unfinished flats.
A middle-class real estate dream gone wrong
The Parsvnath Privilege saga is emblematic of the souring of the dream of Greater Noida, which had emerged as the newest magnet for Delhi’s burgeoning middle-class.
As many as 115 builders have been classified as ‘defaulters’ by the Greater Noida Industrial Development Authority (GNIDA). Together, they owe more than Rs 6,000 crore to the authority.
Among these defaulters are included the once-lionised Amrapali, which owes GNIDA upwards of Rs 2,700 crore; Unitech owes Rs 420 crore, and Parsvnath Rs 113 crore. Panchsheel and Supertech are the other fat-cat defaulters, according to the GNIDA.
The GNIDA list was last updated in 2018.
Real estate agents in the sprawling suburb say builders today have no money to complete their projects. The Indian Express had reported in 2019 that 1.06 lakh flats promised in Noida and Greater Noida had not been delivered to their rightful owners. And as many as 1.03 lakh flats in Greater Noida had not got their completion certificates.
Jaypee Infratech Limited (JIL), the original developer of Greater Noida, which is neck-deep now in insolvency proceedings, is yet to deliver 17,756 of 30,000 flats in the Wish Town Project. Not long ago, a number of aggrieved home buyers gathered at Jantar Mantar, New Delhi, to plead with Prime Minister Narendra Modi to intervene in the JIL matter so that they get a fair deal out of the insolvency settlement.
In January 2020, data with property consultant JLL India showed as many as 2,18,367 housing units valuing Rs 1,55,804 crore were delayed and at various stages of construction in Delhi-NCR, Mumbai, Chennai, Kolkata, Benagluru, Hyderabad and Pune.
The JLL said the real estate companies of Delhi-NCR were biggest defaulters as it accounted for 71 per cent of the numbers in volume and 56 per cent in terms of value.
Parsvnath, meanwhile, has been incurring losses since 2016-17 and, according to one of the let-down home buyers, the company seems to be in no hurry to cough up the compensation money it has to pay to honour the NCDRC order.
“No one has approached us from the company,” confirmed Brig. (Retd.) Rakesh Dhir, one of the six petitioners, who has been making EMI payments for a flat that was to be in his possession a decade back. “All my savings, whatever little I had, have been exhausted,” rued the retired Army officer. The company has time till 9 May to pay up.
Dhir’s plight is a little worse than that of the 12 families who moved a year and a half back into their flats, which Parsvnath had evidently completed in a hurry. They had to not only complete the tiling of their new homes at their own cost, but also organise the maintenance and security after making an additional advance payment of Rs 10 lakh each.
One of these new residents, who did not wish to be named, explained his compulsion: “Our money had been stuck for 10 years before we received possession of this flat. We started living here a year and a half back. I am just relieved that I am able to live in my own house after all this time.” They were not compensated in any way for their agonising wait.
Why NCDRC order is a major step forward
Sukham Ahluwalia, who represented the home buyers before the NCDRC, however, was happy with the gains the petitioners had made. He underlined the fact that it was the first time a consumer disputes forum had sentenced a real estate company’s managing director and directors to prison terms for flouting rules.
“This is the first time that Parsvanath has faced a harsh order,” Ahluwalia said. The NCDRC had been “struggling” to settle the case amicably, but the company’s refusal to agree to any terms compelled the commission to issue its tough order, the counsellor added.
In the company’s defence, Parsvnath’s lawyer Manoranjan Sharma said, “The three-month deadline hasn’t been completed yet.”
Asked whether the construction of the remaining flats is likely to be completed in the coming months, Sharma said, “That is not the issue being considered by the Supreme Court. The company will refund the money within the deadline set by the court.”
A company representative, who did not wish to be identified, pointed to an unfinished project by another builder and said: “Look at that building. The builders have declared bankruptcy and deserted their buyers. At Parsvnath, we haven’t done anything like it. We are trying our best to give possession to people. Already, 12 families have moved in and more will come in soon.”
He could not, however, say how Parsvnath proposes to complete the remaining 832 flats.
According to local real estate agents, three other Parsvnath projects in Greater Noida — Platinum, Panormala and Estate — are doing well. “Hundreds of families are already living there and some other projects of the company are ready for possession,” said an agent. “Some of the flats are as big as 3,000 square feet.”
Parsvnath, clearly, is in a position to comply with the NCDRC’s refund order, upheld by the Supreme Court.
Ironically, the present rash of promises not kept and payments not made come at a time when real estate management consultancy companies are reporting an upswing in the residential property market. John Lang LaSalle (JLL) reports that home sales recovered by more than 90 per cent of the pre-Covid levels across seven cities, including Delhi-NCR, in the first quarter of 2021.
Among the seven cities, Mumbai accounted for 23 per cent of the new home sales in the first quarter of 2021, followed by Delhi-NCR at 21 per cent. These bullish sentiments, though, date back to the present surge of Covid, whose depressing effect is likely to be reflected in the second quarter of 2021.
According to Samantak Das, chief economist and head of research at JLL, “The sustained growth in sales presents clear signs of demand and renewed buyer confidence in the market.”
Online property portal Magicbrick’s city report for January-March 2021 also noted that the demand for homes in Noida and Greater Noida was closely “inching” towards normality.
How developers messed it up in Greater Noida
So, what has gone wrong in Greater Noida?
Local real estate agents are of the view that the builders bit off more than they could chew.
Satyapal Verma, an old hand in the Greater Noida property market, explained: “The problem is, you can lease land in Noida-Greater Noida by paying only 10 per cent of the money as down payment and the rest through EMIs. The builders here therefore ended up over-investing and launching too many projects at the same time. As a result, they could not pay their EMIs on time and ran out of operating capital. Even I have a shop that has not been handed over to me for over a decade by the Wadhawans.”
Another real estate expert, who did not wish to be named, explained that when Greater Noida came up, the home development projects were promoted as “affordable”, being priced at Rs 4,000 to Rs 5,000 per square foot (the range was indeed “affordable”, given the prices that prevailed in the overheated Delhi-NCR market).
“Typically, what happened was that these companies got construction loans from banks without much difficulty against land they had obtained on easy terms,” explained the expert.
“Had they been careful about their finances, the developers could have taken advantage of the cost arbitrage and sold the homes at the advertised ‘affordable’ prices.”
The cost arbitrage, in this instance, would arise from the clear price advantage that the Greater Noida market offered over the rest of Delhi-NCR.
“It did not work because many of these developers used the bank money to buy more land and for new construction without completing the projects they had taken up originally,” the expert said.
Soon, the builders were cash-strapped and the overheated market started cooling down, which resulted in property prices and earnings of builders declining steeply. This resulted in the downward spiral of projects not being completed and home buyers not getting their promised dream nests.
The opinion of the people in the business is that only a government-supported bailout package can see the incomplete projects of Greater Noida coming through. “These are dense projects, so we are talking about a lot many flats being stuck for a long time,” said an agent.
That may become the detonator of a legal time bomb. For, the Parsvnath judgment has shown that the country’s courts are in no mood to suffer recalcitrant developers.