NBCC gets homebuyers’ nod to complete Jaypee projects
The agony of thousands of Jaypee Infratech Ltd homebuyers may end soon as the week-long voting process threw up state-owned NBCC (India) Ltd as the overwhelming favourite to complete under-construction projects of the bankrupt real estate developer.
NBCC, which was pitted against a consortium of Suraksha Realty Ltd and Lakshdeep Investments and Finance Pvt. Ltd, got 97.36% of the votes of 13 lenders and more than 12,000 homebuyers.
Several under-construction projects along the 167-kilometre-long Yamuna Expressway cut across Noida, Tappal, Jaganpur, Agra, and Mirzapur areas of Uttar Pradesh.
Jaypee Infratech is one of the 12 companies that figured in the Reserve Bank of India’s first list for bankruptcy proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The case was admitted in the insolvency court for resolution two months later.
The total claims against the company admitted by the court-appointed resolution professional to oversee the insolvency process amount to ₹23,176 crore. Of this, Jaypee Infratech owes ₹9,783 crore to banks, ₹13,364 crore to homebuyers, and ₹29 crore to fixed deposit holders of securities issued by the company.
The resolution of the case will provide a lot of relief to thousands of middle-class families who had their hard-earned money, ranging from ₹10 lakh to ₹50 lakh, stuck for eight to nine years.
They can now hope to get their dream asset in nine to 42 months, as promised by NBCC.
The company will pay homebuyers ₹5 per square feet in case the delivery is delayed beyond 12 months from the deadline. The company, known more for its project management consultancy, has secured a ₹2,000 crore credit facility from HDFC Bank to undertake the work.
One condition that could frustrate the homebuyers is that they will have to bear the cost of any compensation that may have to be paid to farmers.
The state-owned Navratna will hand over 1,526 acres, worth ₹5,000 crore, to lenders. It will also hive off the toll road (Yamuna Expressway) as a separate special purpose vehicle and hand it over to the banks.
The Jaypee resolution was an acid test for the viability of the IBC as it pitched homebuyers, with small amounts of money stuck, against the might of the financial creditors led by IDBI Bank who had crores at stake.
This led to the case going far beyond the 270-day deadline for the resolution of IBC cases. That sunset period had lapsed on May 12, 2018. Initially, 21,781 homebuyers had filed a case against the company.
The battle between Jaypee’s lenders and homebuyers on the choice of preferred builder led to an amendment in the IBC, which also recognized homebuyers as financial creditors.
The Jaypee case is a perfect example of the challenges faced by infrastructure projects in India.
Led by an ambitious promoter, the company tried to capitalise on the housing boom of the last decade and launched several projects to cater to various income groups. However, the 2008 financial crisis sucked out liquidity. It was also the time environmental concerns began to gain currency and the green tribunal clamped down on construction in the Noida region for its proximity to a bird sanctuary. More uncertainties, amid a tightening of money supply, led to people pulling out and real estate was no longer an asset for returns.