NBCC as Amrapali homebuyers’ saviour sets a bad precedent

S Murlidharan

The middle class homebuyers of Amrapali, as indeed of equally other dubious builders, deserve full sympathy for losing their precious and hard-earned money to the wiles and guiles of its rapacious promoters.

The Amrapali group with its epicentre in Noida and Greater Noida has been in the eye of storm for the past couple of years for siphoning off homebuyers’ funds and leaving them in the lurch.  Prompt and severe action must be taken against the group and its promoters a la the one that was commandeered by the Supreme Court way back in 1996 in the case of Skipper Construction (DDA vs Skipper Construction Co (P) Ltd 1996(4) SCC 622).

Skipper Construction was a similar story, but the aggrieved were commercial flat bookers. The top court constituted a special committee headed by a former SC judge to retrieve the loot from its marauding promoters and restoring them to its rightful owners, including the commercial flat bookers who had paid Rs 14 crore in advance in good faith even before Skipper had assumed lawful possession of the land.

In doing so, the SC took the extraordinary step of invoking Article 142 of the Constitution to do complete justice. The point is if the SC could go to such lengths for commercial buyers, it ought to have enacted an encore this time round for the more hapless common folks.

Of course, it has intervened in favour of the homebuyers. But what it has instead done is to ask the state-owned National Building and Construction Corporation (NBCC) to build or complete the building of houses with the help of money the homebuyers still have to pay for their houses. This they have to deposit into the UCO bank branch in the Supreme Court.  NBCC will be paid 8 percent commission.

Even though NBCC has voluntarily and cheerfully accepted this rescuer role, there are many unanswered questions. There are as many as 42,000 homebuyers waiting for their homes. The quantum of homebuyers’ funds diverted are estimated to be Rs 3,000 crore.  Assuming the receiver appointed by the SC succeeds in establishing the money trail to distant foreign shores and retrieves the loot completely, will NBCC be able to complete the stalled projects within such a tight budget? Who will pay it the commission of 8 percent the SC has ordered?  Will it be 8 percent of the value addition to the stalled projects done by NBCC or of the entire cost of a house? Will NBCC have to put in its own money to complete the stalled projects of Amrapali?

Given the pan-India applicability of the SC verdict, NBCC might well become the beast of burden for the travails of homebuyers in future. That is a grim portent. That role (beast of burden) is already being performed by the State Bank of India in the context of industrial and commercial loans, including Rs 9,000 crore approximately each to the defunct Kingfisher Airlines and the grounded Jet Airways.

Air India too owes the SBI and its co-lenders considerable amounts.  Public sector banks led by the SBI have lent themselves -- thanks to their umbilical cords firmly tied to the government -- admirably to behest lending as vividly and picturesquely described by Prime Minister Narendra Modi in his election campaigns as ‘phone banking’.

Parenthetically, it may be mentioned that enlightened homebuyers prefer ready-to-occupy properties. Not only do they get to see what they are buying and paying for including the amenities and fittings, they more importantly are assured of their funds not being diverted by the builder. This assurance they get when they pay bulk of the cost of the house on registration with the jurisdictional sub-registrar.

For this to become the norm, a paradigm change needs to be ushered in -- homebuyers will not be exposed to under-construction projects. That risk will be borne by the more resourceful financial institutions. Individual homebuyers would step into the scene only on successful completion of the project.  It is the self-financing nature of the industry that has been the bane of the homebuyers.

The author is a chartered accountant and columnist. Views are personal.