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Amrapali case: SC asks Centre to step in to reduce interest rate for funding stalled projects

SBICAP informs SC that it may be difficult to fund Amrapali projects below 12 percent interest

The Supreme Court on August 31 asked the Centre to step in and reduce the rate of funding for completion of stalled Amrapali projects after SBICAP Ventures (SBICAP), the financial institution that manages the stressed asset fund, informed the apex court that it may be difficult to reduce the rate of interest from 12 percent.

“The government may have to consider a sovereign guarantee as this is a court monitored project,” Justice Arun Mishra said at the hearing.

The order is awaited.

The SC is expected to take up the SBICAP issue on September 1.

The Supreme Court on August 25 had directed SBICAP to begin funding six projects of the embattled Amrapali Group after it informed the court that it cannot fund all projects but only six that it found to be viable.

The top court had at the last hearing asked the Centre to consider as a special case and provide remaining money for construction of other stalled projects from the stress funds created for the real estate sector.

A bench of Justice Arun Mishra and UU Lalit was told by senior advocate Harish Salve appearing on behalf of SBICAP that it has decided to fund six identified projects of the Amrapali group.

“Let prevailing rate of interest on lending may also be considered with respect to return of profit on investment,” the bench had said.

SBICAP Ventures, the manager for the government's Rs 25,000-crore stressed asset fund, decided to cut the internal rate of return (IRR) to 12 percent from 15 percent in June. SWAMIH Investment Fund I is the name of this special window announced by the government in November last year.

"I hope this issue of funding by SBICAP is sorted out soon as this has delayed the commencement of construction work in the projects chosen to be financed by them despite finalisation of contractors," advocate Kumar Mihir, who represents homebuyers in the case, told Moneycontrol.

The apex court appointed court receiver in the Amrapali Case R Venkataramani had submitted an application to SBICAP to fund stuck projects in May. Series of meetings have taken place with the court receiver, NBCC and SBICAP on the issue.

At the Amrapali case hearing on June 3, SBICAP had informed the apex court that it would create a Special Purpose Vehicle (SPV) with the court receiver and would appoint a CEO to take over the construction of stalled projects in Noida and Greater Noida.

At an earlier hearing, the apex court was informed by the court receiver and senior advocate R Venkataramani, who has been entrusted with the task of managing the affairs of the Amrapali Group, and Harish Salve, counsel for SBICAP, that an amount of Rs 1,050 crore may be released by way of funding for stuck projects, but there were issues with respect to monitoring the completion of projects and the fact that NBCC was not agreeable to a fixed price contract.

Salve had also informed the court that SBICAP had a detailed meeting with the court receiver and had agreed in principle to finance Amrapali projects.

The real estate firms in Noida and Greater Noida areas have received much needed relief after the apex court had capped the rate of interest at 8 percent to be charged by authorities on the outstanding dues of land against the exorbitant 15-23 percent.

NBCC has been tasked to complete the 23 projects of Amrapali Housing, of which it has already completed and handed over two projects -- Eden Park (Noida) and Castle (Greater Noida) -- comprising 618 units and valued at Rs 7.5 crore.

On August 24, NBCC started construction of over 16,000 flats of Amrapali after the Bhumi Poojan. The projects where construction was started include Smart City-Golf Homes, Kingswood, Leisure Park (Phase I and II  and River view), Centurion Park - Terrace Homes and Tropical Garden, Leisure Valley - Adarsh Awas Yojna and Dream Valley - Enchante.

“Over 6,000 workers have been deployed on these projects, which is likely to double in the next two months. The progress of work was badly affected by COVID-19. Work is now progressing well to some extent by following all protocols and precautions,” PK Gupta, CMD of NBCC, had said.

Work on eight projects in Noida involving 11,741 units in Silicon - 1 & 2, Silicon-Crystal Homes, Sapphire I &II, Princely, Platinum/Titanium and Zodiac and three projects in Greater Noida -- Centurian Park-Low rise and Valley, Leisure Valley Villa and Dream Valley Villas -- involving 2,666 units are in progress.

NBCC said they have started handing over flats to homebuyers and are likely to handover around 160 flats in the first week of September.

“All these works are likely to be completed from 9 months to 36 months in all respects. The completion of projects is entirely depends upon timely deposit by homebuyers and arrangement of funds from other sources,” Gupta added.

More than 40,000 homebuyers, who had invested in various Amrapali projects more than eight years ago, are yet to receive possession of their homes.

The estimated cost of completion of all these pending projects of Amrapali is around Rs 8,500 crore. NBCC, with the support of the apex court, has already completed and handed over two stalled projects. Implementation of some more projects is in progress at present, with the funds made available by the Supreme Court.

On July 23, 2019, the apex court had cracked its whip on errant builders for breaching the trust reposed by homebuyers and ordered cancellation of the registration of the Amrapali Group under the real estate law RERA, and ousted it from its prime properties in NCR by nixing the land leases.


Vandana Ramnani
Vandana Ramnani
first published: Aug 31, 2020 05:36 pm