Ghost Town In Mumbai Suburb Has A Common Link With PMC Bank Fraud

In the middle of a bustling northern suburb of Mumbai, cranes lay frozen atop unfinished buildings, rusted steel rebars poke the air, cobwebs of scaffolding cling to sunburnt concrete, and the undergrowth is creeping in. The place is deserted, but for five security guards eating lunch out of their tiffin boxes and three puppies scampering around.In the background, a row of nine luxury highrises tower over the complex. No one lives there either.In this ghost neighbourhood the size of 12 cricket fields in Goregaon, once stood 70-year-old Patra Chawl. As it began to crumble, residents agreed to redevelopment. But the work on the Rs 1,000-crore project stalled three years ago after the builder went bust. The state housing authority now alleges fraud. At the centre of all this is Housing Development & Infrastructure Ltd., an insolvent slum redeveloper whose founder is being probed for allegedly siphoning money from Punjab and Maharashtra Cooperative Bank.Mumbai, one of the world’s most crowded cities, has the costliest real estate in India because land is scarce. One way to create affordable housing is to redevelop old buildings. But people hesitate to move out of dilapidated structures, putting lives at risk, because fraud is common. For tenants of Patra Chawl and buyers of apartments sold in the project, those fears have come true.“After the builder stopped paying the rent (agreed under the project contract) in 2017, I had to mortgage gold to make ends meet. For my daughters’ education, I borrowed Rs 5 lakh from my friends and relatives,” said Hemakant Sakharkar, a tenant of Patra Chawl shifted to a house nearby. Sakharkar, a real estate agent, said he missed payments to his landlord for eight months as his income fell amid a slowdown. “So many of our neighbours have left as they can’t afford the rent outside.”.Patra Chawl, called so because of patra or corrugated-metal-sheet roofs, was built in 1948 for housing the poor. Some 3,360 people lived in 672 tenements of 101 buildings spread across 47 acres..In 2008, the tenants and the Mumbai Housing and Area Development Authority hired Guruashish Construction Ltd. for redevelopment. The contract comprised building 16 towers with 11 floors each for families and hand over more than 1 lakh square metres of built-up space to the housing authority. The company also had to compensate tenants with rent during the construction period.In return, the firm got the rights to develop the rest of the space and sell it at market rates—a standard tradeoff in a resettlement in Mumbai.Then, HDIL entered the picture. In 2010, it fully acquired Guruashish Constructions. But the slum redeveloper’s connection with Guruashish dates further back.At the time of takeover, according to filings with the Ministry of Corporate Affairs, Rakesh Wadhawan, executive chairman at HDIL; and Waryam Singh, then a director at HDIL who later became chairman of PMC Bank, were both members on the board of Guruashish Construction.Wadhawan, his son Sarang, and Singh were among the five arrested for the alleged fraud at PMC Bank. They have been accused of hiding more than Rs 6,700 crore worth of bad loans with the help of cooperative lender’s employees by creating ghost accounts.‘Funds Siphoned’Months after the acquisition by HDIL, Guruashish sold the rights to develop the salable component of Patra Chawl project to nine companies:Ekta Everglades HomesPreet Gurha NirmanGold Finger Realty InvestorsRNA NG Infrastructure & DevelopmentKBJ DevelopersFist InfraKiyana Ventures—part of the Kalpataru GroupPink skyscrapers Real EstateBhumi Shashwat Estate.In 2011-12, the financial year Guruashish sold the rights, according to statutory filings, it clocked a profit of Rs 510 crore on a revenue of Rs 1,050 crore. The company used the proceeds pay Rs 809.74 crore as advances to suppliers.The real estate developer also borrowed Rs 1,065 crore from Union Bank of India, IL&FS Financial Services Ltd., and Yes Bank Ltd., among other lenders, according to a petition filed in the Bombay High Court. Filings show the developer also borrowed Rs 75 crore from PMC Bank.Despite raising more than Rs 2,100 crore, the company failed to complete the project worth half the cost. By 2017, Guruashish had stopped paying rent to tenants, halted work and defaulted on repayments.That prompted Union Bank of India to file an insolvency petition in June 2017 against Guruashish for repayment of Rs 254.54 crore. Bank of India, among other lenders, filed a separate plea against HDIL to recover dues.MHADA terminated the redevelopment contract in 2018. The authority also held that sub-contracting work on the salable portion of the project was illegal.Since beneficiaries havn’t been rehabilitated yet, MHADA can’t issue the occupation certificates to the builders. At least three of them—Ekta Everglade, Kiyana Ventures (Kalpataru Group) and KBJ Developers—have almost completed their apartment towers.The nine developers challenged the termination of contract in the Bombay High Court, claiming they had a no-objection certificate signed by senior MHADA officials. The housing authority, in its response in the court, said the officials were not authorised to give such a permission and “the NOC is a fraudulent document which has no authority or force of law”. It accused Guruashish of fraudulently obtaining the approval, and alleged that the developer and its parent HDIL siphoned more than Rs 2,000 crore from the project.One of the directors of Guruashish Constructions was last week arrested by the Mumbai Police on a complaint of fraud filed by the housing authority.Madhu Chavan, chairman of MHADA’s Mumbai board, declined to comment saying the matter is sub judice. Emailed queries to Guruashish and HDIL remained unanswered.Kalpataru Group declined to respond to a BloombergQuint query, and Goldfinger Realty Investors refused to comment saying the matter is sub judice. Other developers have yet to respond..‘Double Burden’HDIL also planned to build luxury towers— HDIL Meadows—on a portion of the Patra Chawl land to sell apartments at market rates to recover the costs. Of the 610 flats, it sold 465—sale deeds were signed for 275.After the project was stalled in 2016, 250 homebuyers came together and filed a petition in the Bombay High Court, which ordered the developer to complete construction by November 2019. The company failed to comply.Many of the homebuyers invested their life savings, Deepak Trivedi, who bought an apartment in HDIL Meadows, said. They now face the double burden of an equated monthly instalment and rent, he said.Rahul Thakkar, another homebuyer, said they plan to take over the development and have sought permission from MHADA..MHADA, too, would have received about 2,500 flats as its share in the project. Of these, 306 units are almost ready and the authority conducted a lottery. Luckily for allottees, they were not asked to pay.Also Read: Mumbai Is Creating Vertical Slums For Its Displaced Urban PoorAlso Read: These Mumbai Residents Are Rejecting 1,100-Sq-Ft Homes In ResettlementAlso Read: MHADA To Redevelop City’s Red-Light District KamathipuraThe housing authority estimates that about Rs 300 crore is needed to complete the rehabilitation portion of Patra Chawl project. Maharashtra appointed a special committee headed by Johny Joseph, former municipal commissioner, to come up with a solution. Jitendra Awhad, state housing minister, has promised an early resolution.Still, it’s still uncertain when the ordeal of tenants like Sakharkar would end. But he hasn’t given up. “I am still hopeful that I will go back to Patra Chawl with my family in our new house.”

Ghost Town In Mumbai Suburb Has A Common Link With PMC Bank Fraud

HDIL, accused in the PMC Bank fraud, is linked to a ghost town in Mumbai’s suburb.

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