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ED files 6 more cases to probe builder-banker nexus in ‘subvention scheme’
ED had earlier registered 22 money laundering cases in the matter, also based on CBI’s 22 FIRs filed on July 28.
The Enforcement Directorate (ED) has filed six more money laundering cases to investigate the alleged nexus between builders and financial institutions in cheating homebuyers by innovating and introducing ‘Subvention Scheme’ of home loans, taking total registered cases in the Supreme Court ordered probe to 28, people familiar with the development said on Sunday.
The six fresh prevention of money laundering act (PMLA) cases are based on the Central Bureau of Investigation (CBI) first information reports (FIRs) filed on September 25 and subsequent raids to investigate some builders in Maharashtra, Karnataka and West Bengal.
As reported by HT on August 22, ED had earlier registered 22 money laundering cases in the matter, also based on CBI’s 22 FIRs filed on July 28.
“We are going after builders for cheating thousands of homebuyers through this subvention scheme. We will locate the funds diverted by the builders and help homebuyers recover their hard-earned money,” said an ED officer, who didn’t wish to be named.
This person added that there could be diversion of thousands of crores of rupees by builders.
The Supreme Court had ordered an investigation into a possible “unholy” nexus between the builders and financial institutions to sanction massive amounts under so-called subvention schemes without following any due diligence.
ED is already investigating about 162 cases pertaining to real-estate frauds across the country.
Some of the top builders named by the CBI and ED in their cases so far include Supertech Limited, Logix City Developers Pvt. Ltd, Jaypee Infratech Ltd, Jaypee Sports International Limited, Ithaca Estate, among others.
In April this year, the Supreme Court ordered a CBI probe after a group of over 170 petitions filed by more than 1,200 homebuyers alleged that banks had disbursed huge loans to builders under a scheme even before the projects were started. After builders/developers defaulted, the banks demanded equated monthly instalments (EMIs) to recover the loan amounts from the homebuyers.
Subvention schemes involve a tripartite agreement between the buyer, the bank, and the developer. Under these, buyers typically pay between 5% and 20% up-front, while the bank loans the rest to the developer in installments. The developer pays the interest on a loan for a certain fixed period, usually two to four years, until the buyer takes possession. The buyer then starts paying back the loan in EMIs.
“In most of the projects, launched in 2013-15, most builders/developers started defaulting on payment of EMIs in 2018-19. Subsequently, the builders stopped paying promised pre-EMIs from 2018-19, and banks turned on buyers while projects remain incomplete,” said a second ED official.
The second officer stated that directors or promoters of several real estate firms have also been named in the cases.
Among banking and other financial institutions, unidentified officials of the State Bank of India, Indiabulls Housing Finance Ltd, Piramal Finance, HDFC Bank, ICICI Bank, Tata Capital Housing Finance and PNB Housing Finance Ltd, among others, have been named.
To be sure, a status report submitted by CBI earlier this year said the majority of the 1,200 homebuyers/borrowers represented before the SC pertain to Supertech, which is facing insolvency proceedings.
