On April 27, 2023, the Economic Offences Wing of the Mumbai Police arrested Dharmesh Jain and Rajiv Jain, directors of Nirmal Lifestyle and prominent real estate developers based in the Mulund area of Mumbai. They have been held for failure in handing over possession to 34 homebuyers who had booked apartments in projects of Nirmal Lifestyle since 2011.
However, this does not end here. The developer has allegedly defaulted on bank loans and premiums to be paid to BrihanMumbai Municipal Corporation for real estate projects up to Rs 100 crore and also has insolvency proceedings ongoing at the National Company Law Tribunal (NCLT).
Why did the Mumbai Police arrest the two Nirmal Lifestyle directors?
According to Mumbai Police officials, the arrests have been made on the basis of the complaint received from 34 homebuyers in real estate projects named Olympia, Panorama and Spirit, etc. The homebuyers had made bookings since 2011 but neither got the possession nor the project came into existence.
The police added that both Dharmesh and Rajeev Jain in connection to First Information Report filed in April 2022. Post the arrest, they were produced in the local court and remanded to police custody till May 3.
How many homebuyers are stuck?
According to Mumbai Police officials, the number of homebuyers who have not got possession of their apartments after booking them is more than 34. "We are investigating at least three complaints filed against the Jains, and will take further action accordingly," a police official said.
A senior BJP leader from Mumbai who did not wish to be named said, "Roughly around at least 1,500 homebuyers are yet to get possession in different projects of the real estate firm. The developer must have collected Rs 300 crore to Rs 400 crore from these homebuyers. While a couple of stuck projects have been taken over and are being completed by other developers, there are close to a dozen projects that are still stuck and homebuyers are left in a lurch."
What do homebuyers say about the arrests?
According to homebuyers, their purpose is to not get the developers arrested and keep them in jail but they want the authorities to help or assist them to get possession of their dream homes.
Pankaj Thadani, 35, booked a two-BHK apartment in 2011 in Nirmal Zircon for Rs 58 lakh, "Our purpose is not solved by the arrest, we are fighting for possession of dream homes that we booked and paid the developer for from our hard-earned money. We hope that not just arrest, the authorities also help the homebuyers in getting possession. We are not wanting or holding the developers to ransom but want them to just deliver the promises they made in our agreements."
How much bank loans have the developers defaulted on?
Not only homebuyers, but the real estate firm has also defaulted on loans from the Bank of Baroda (BoB), which earlier this year sealed one of the iconic assets owned by the Jains. BoB’s stressed asset recovery branch took part-possession of one of the famous malls, Nirmal Lifestyle Mall, in the Mulund area on January 24. This followed the failure on the part of the Mall to repay a loan amount of Rs 161 crore. The bank had first issued a demand notice to Nirmal Mall and its Managing Director Dharmesh Jain to repay the amount within 60 days on December 6, 2019.
The part-possession was carried out under the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002. Earlier, the creditors had also approached the NCLT against the firm, and the Jains have been settling the outstanding with the non-banking financial institutions.
Are any of the Jains’ projects under insolvency proceedings?
The Maharashtra Real Estate Regulatory Authority (MahaRERA), on April 26, published a list of 308 real estate projects undergoing insolvency proceedings at the NCLT in Maharashtra, of which 233 projects are in the Mumbai Metropolitan Region (MMR). Out of the 308 projects undergoing insolvency proceedings, around 30 projects are of Jains that were registered under the company named Nirmal Lifestyle Kalyan Private Limited.
Which projects has Nirmal Developers built?
Nirmal Developers is a prominent real estate developer from Mulund. The firm constructed several residential buildings and Nirmal Lifestyle Mall in Mulund, one of the few iconic malls that came up in Mumbai around 2005. However, soon the firm came into trouble owing to financial constraints. The firm has several projects around the MMR and possession to homebuyers is allegedly delayed.
What went wrong?
The stuck projects of Nirmal Lifestyle are mainly from the pre-Real Estate Regulatory Act period. Moneycontrol had published a series on India's most delayed realty projects, wherein Nirmal Lifestyle projects launched between 2005 and 2013 were featured. Around 800 homebuyers had made the bookings but are yet to get possession of their dream homes.
A prominent developer of Mumbai close to the Jains not wishing to be named said, "Nirmal Lifestyle holds land banks in several localities of Mumbai, and the developer for quite a few years is trying to sort out the problems by leveraging on the land bank. However, the Jains are stuck because they are not able to monetise the land bank due to several hurdles."
The BJP leader quoted above said, "The firm in the early days seems to have invested all the receivables from homebuyers in projects launched in Mulund and Kalyan in purchasing land parcels, but soon it turned out that the projects from which money was used for asset creation could not be constructed and delivered, and hence the problems now."
Meanwhile, an email query sent to Nirmal Lifestyle did not elicit any response. However, in several interactions with Moneycontrol in the past, the developer had admitted to delay in possession and said they were trying to solve the problems of the homebuyers.
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