It is almost a month since the Supreme Court (SC) ordered the demolition of the 40-storey twin towers by Supertech in Noida. The two towers, Apex and Ceyane, are part of the Emerald Court Project of Supertech.
The apex court had observed that there was collusion between the Noida Authority and the builder. It upheld that the construction had violated the minimum distance requirement and that the structures were built without taking the consent of the individual flat owners. Under the UP Apartment Act, this is a must.
In a separate case, last week, the Delhi High Court (HC) directed Supertech to deposit Rs 50 lakh, out of the outstanding Rs 1.79 crore, into the homebuyer’s account within a week to show its bona fides to the court.
The HC also stayed a National Consumer Disputes Redressal Commission (NCDRC) order sentencing Supertech managing director Mohit Arora to three year’s imprisonment, until October 4.
The NCDRC had, on September 20, issued an arrest warrant against Arora for non-compliance of an order in a case filed by a homebuyer who had bought a villa in the builder’s Greater Noida project.
The NCDRC had sentenced Arora to jail for not refunding homebuyer Brigadier (rtd) Kunwal Batra and his daughter Ruhi Batra, after the builder failed to hand over the villa property they had bought in the Supertech Upcountry project in December 2013.
Lawsuits dent demand, image
A flurry of lawsuits filed against the builder seems to have had an impact on the company’s brand. According to brokers in the Noida market, who did not wish to be named, the number of queries for Supertech projects has been reduced to half since the last few weeks and the impact is similar to what happened to Unitech, Amrapali and Jaypee projects when cases were filed against the companies or when the promoters were put behind bars.
“The rulings by the SC and the NCDRC have had an impact on the overall Noida market and the builder, in particular. This is similar to the impact that followed the collapse of Unitech, Amrapali and Jaypee. It has definitely impacted the sale and purchase of Supertech properties,” one broker said.
“People are no longer confident about buying even ready-to-move-in properties as they are not sure whether project plans have been cleared, whether additional floors have been constructed or whether occupation certificates have been received or not. News spreads fast,” he says.
Today, people buy a property if it satisfies three criteria – a home loan is available, it is ready to move in and immediate registration. “Today, a buyer is more concerned about getting home ownership rights and not easily swayed by promises. However, it is very difficult to find a housing unit in a project that meets all these three criteria,” he says.
A legal expert who has been fighting battles for homebuyers told Moneycontrol that “nobody would want to buy property from a builder who does not deliver projects on time or whose directors do not honour the court’s orders. It’s understandable if a project has been delayed for a few months but not when it is delayed by almost a decade,” he says.
Supertech faces mounting dues
Supertech also owes dues of over Rs 112 crore under RERA (Real Estate Regulatory Authority). UP RERA has issued recovery certificates to the builder to the tune of Rs 112 crore in Gautambudh Nagar, he says.
“Once the recovery certificate is issued, the RERA has to attach the properties of the concerned builder against whom recoveries have been issued. Buyers may have to be careful about ready-to-move-in units, too, as it is not known which properties have been attached. Attachment means that those properties cannot be sold to anybody until the recovery is complete,” he says, adding homebuyers need to be wary of buying such properties.
The UPRERA had passed 282 orders against Supertech for refunds of allottees and issued 249 recovery certificates against the promoter. By June 23, compliance had been done in only 101 cases by the company.
As per data obtained from UPRERA, recovery certificates worth Rs 103 crore have been issued against Supertech of which Rs 2 crore have been recovered. An amount of Rs 101 crore is yet to be recovered from the builder.
E-auctioning route to further hit Supertech
UPRERA’s proposal for e-auctioning unsold properties of builders against whom recovery certificates have been issued is in the final stage and may be cleared by the state government soon.
“Once this proposal is cleared, the district magistrate may be in a position to auction unsold/sealed inventory of these builders, which is worth more than Rs 300 crore. The amount recovered through the process will then be returned to homebuyers,” says Balwinder Kumar, member, UPRERA.
The brand’s perception, too, appears to have taken a beating after the SC order. “More than 200 homebuyers who had invested their life savings into these towers have had to suffer. Also, with this order, the trust that buyers had on an authority-approved project has also waned,” says another broker in Noida.
Anil Nair, a business and branding consultant, agrees that the sector as a whole suffers from negative publicity. There’s also a lot of mistrust. “Acts such as demolition may impact the brand severely. Just like the Amrapali and Unitech cases, court cases may lead to this brand also taking a beating,” he says.
The silver lining
Some experts are of the view that the SC ruling may have a positive impact on the Noida market.
According to Prashant Thakur, Director & Head, Research, ANAROCK Group, the Noida market, in general, has been beset with delayed or stuck real-estate projects.
RERA was largely a result of what was happening in NCR. Having said that, the recent ruling of the SC may have a positive impact.
“It gives a clear signal that Noida is becoming a more transparent market, and several Grade A developers, such as Godrej, are launching projects here. It is an indicator that only strong developers with a good delivery track record are seeing traction in the market. While the problem of unsold inventory persists, there is also hope playing out in the market.
“One is witnessing several developers compromising on their margins to clear unsold inventory, so that cash flows start to come in. Developers have realised that there is a huge amount of holding cost. Bankers, too, are pressuring developers to get rid of unsold inventory and get the cash flow cycle running again,” he explains.
‘Discount offers reflect tight spot builder is in’
It’s not surprising, therefore, that the Supertech Group recently advertised massive discounts for its Spira project, located in Sector 94. The ads promised fully furnished apartments for Rs 3.82 crore. They were earlier priced at Rs 5.53 crore.
Local brokers said units in this project were earlier offered at Rs 17,000 per sq. ft, with an additional discount of 25 percent. The same units are now being offered for around Rs 12,000 per sq. ft.
Some real-estate experts said the campaign reflected the builder’s problems following the SC order to demolish the twin towers projects in Sector 93.
“These offers seem to be an attempt at trying to meet their liabilities by disposing of their inventory as there seems to be a huge pressure from the lenders. Having said that, this is an issue faced by most developers across the country today. Despite much of their inventory getting sold during the pandemic following stamp duty concessions, some builders are being pushed by their lenders to dispose of inventory in order to meet their financial commitments,” said Pankaj Kapoor, founder and managing director of Liases Foras.
SC order will not have adverse impact: Supertech
Responding to queries by Moneycontrol on the impact of the SC and the NCDRC orders on the company’s brand equity, RK Arora, chairman, Supertech, said that the order of the “Supreme Court is unfortunate and unexpected as we were of the impression that the Court would be convinced that the construction has been done strictly as per building byelaws. We had provided all necessary evidences for the same. We have filed a modification application and will try to represent our matter again. While respecting the orders of the courts, we are seeking remedies available to us to mitigate the problems.”
Asked if the two events have influenced potential homebuyers, especially those wanting to invest in the company’s ready-to-move-in projects, he said that the company is, at present, implementing 27 projects and the Apex-Ceyane towers are not linked to any ongoing project.
“The order will not have any adverse impact on the company, the group or ongoing projects. We are a financially stable group and we would withstand the impact of the order. After the implementation of RERA regulations, every project has a separate escrow account and the project funds are kept and utilised separately,” he said.
Arora said that the company has augmented customer confidence measures. “Construction at all the project sites is in full swing and it is expected that the booking positions will improve during the festive season. Every ongoing project is tied to a Mission Completion programme, with a target of December 2022,” he added.
“In order to monetise the projects, we have taken various steps, one of which is the sale of plot development as also sale of land for public utilities like schools, hospitals, etc. We have been offering ready-to-move-in flats for customers who have complaints. The company has offered plots of different sizes in various projects in Yamuna Expressway, Meerut, Ghaziabad, Rudrapur,” he said.
On the number of projects that have been delayed so far, he told Moneycontrol that since different phases of projects have different timelines, it cannot be determined whether any project is delayed.
“Project implementation is a continuing process. Some of the phases of our projects have been delayed due to land disputes, court cases, stay orders and the inability of the authorities to provide basic infrastructure like roads, etc.,” he said.
“We are working on approximately 80,000 apartments and have already delivered 60,000 units. Approximately 20,000 apartments are also in an advanced stage of completion, i.e., in the range of 50-80 percent completion and it is expected to be completed by December 2022 in phases. Construction at all projects are going on smoothly and we are planning to give delivery before next year end,” Arora said.
He said that the company is “already compensating buyers for the delay in accordance with the allotment agreement.”
Asked whether the company owes a substantial amount to Noida Authority, Arora said that the amount is “negligible. “It can be determined only when the Authority works out the dues applying SBI MCLR interest rate (minimum lending rate) fixed by the SC. Once the same is done, the dues will be negligible.”To a query on refund orders and their compliance passed by UP RERA against the company, Arora told Moneycontrol: “We have complied with approximately 60 percent of the orders and the rest will also be complied with soon.”