Lodha’s New Cuffe Parade project. (Source: BloombergQuint)

Lodha Struggles To Shake Off Fears Over Punch-Through Walls

A cash crunch and rising debt are not the only worries for the real estate company controlled by India’s richest property tycoon. The Lodha Group is trying to dispel fears that the quality of construction is so bad that people can punch through the walls.

The concerns were fuelled by plasterboard or gypsum board. Used for partitions and lightweight walls, it’s not that prevalent in India. A few buyers of apartments in Lodha’s New Cuffe Parade—four towers of 1,100 premium flats in Wadala, central Mumbai—found them substandard. Shilpi Thard, one of them, with the help of right to information activist Krishnaraj Rao, posted a clip online on Nov. 12 showing how she could easily break through the wall. The video, posted on Rao’s blog and YouTube channel, went viral.

“When I finally made the video highlighting the issues, the Lodha Group sued me and Rao for Rs 100-crore defamation,” Thard told BloombergQuint. “They also attempted to send me to jail.”

While the case is pending, the developer, controlled by Mangal Prabhat Lodha, failed to get immediate relief from the Bombay High Court. A single-judge bench of Justice Gautam Patel earlier this month refused to gag Thard and Rao from raising quality concerns. Lodha, which has rejected the claims, is looking at resolving homebuyers complaints by offering a payout.

That comes at a time when Moody’s downgraded its outlook from stable to negative because of delay in asset sales even as debt comes up for repayment. Developers have been finding it difficult to raise funds from non-bank lenders, among the biggest financiers to the real estate industry, after surprise defaults of AAA-rated IL&FS led to a liquidity crunch.

The court battle has no bearing on the debt woes but it matters for perception. And Justice Patel made a scathing observation. “Calling out someone, with fair comment and justification, is not defamation,” he said in the interim order. “To put it differently: to say the emperor has no clothes is not defamation. It never has been.”

A spokesperson for Lodha Developers said in an emailed response to BloombergQuint’s queries that a detailed trial will be conducted in matters related to the defamatory statements made by Rao and his accomplices. “It has only denied relief at interim stage. Full trial will be held soon and we continue to remain confident that our stance will be vindicated.”

Plasterboard walls at Shilpi Thard’s apartment in Lodha Group’s New Cuffe Parade project in Wadala. (Source: BloombergQuint)
Plasterboard walls at Shilpi Thard’s apartment in Lodha Group’s New Cuffe Parade project in Wadala. (Source: BloombergQuint)

Yet, flimsy walls is just one of the concerns of the homebuyers. Thard, who lives in Bengaluru, had booked two apartments in 2012 at New Cuffe Parade, with the promise of delivery in December 2015. “We paid 95 percent of the total amount in 2015,” Thard told BloombergQuint over the phone. “But we got the possession only in February 2018.”

She alleged:

  • Carpet area was 30 percent less than what was promised in the agreement.
  • Uninhabitable flower bed was sold as part of the carpet area.
  • Building is unsafe in case a fire breaks out.

Thard plans to fight the builder “tooth and nail”, and is in the process of seeking compensation at the consumer forum. She is not the only one who has raised quality concerns.

Vipul Sanghavi, who booked the apartment in Phase 1 of New Cuffe Parade in 2011, told BloombergQuint that while he received the possession in August 2018, he doesn’t want to move in.

“The sample flat looked great and they had promised lot of amenities,” Sanghavi said. “When we entered our flat after taking the possession, it looked much smaller than what was promised to us,” he said. “We got the flat measured by a registered architect and found that the carpet area was 25-30 percent less than what was promised to us.”

Cracks inside Vipul Sanghavi’s apartment in Lodha Group’s New Cuffe Parade project in Wadala. (Source: BloombergQuint)
Cracks inside Vipul Sanghavi’s apartment in Lodha Group’s New Cuffe Parade project in Wadala. (Source: BloombergQuint)

Sanghavi filed for the plan sanctioned by the housing authority under the Right to Information Act. That revealed that Lodha promised a carpet area of 1,342 square feet; but the homebuyers got around 955 sq.ft, he said. “The flat also has many design flaws and the quality of construction is shoddy.”

Such allegations have been made by a group of 25-30 residents representing less than 10 percent of the homebuyers, the spokesperson of Lodha Developers said in the emailed response. Almost every development will have such outliers who claim to be dissatisfied but have different personal agendas, it said.

This group went to the court in 2018 and it didn’t find their claims valid, the company said. Other legal forums, too, have not upheld their claims and, separately, the high court has ruled that contempt proceedings will be initiated against Rao, according to the spokesperson.

One of the towers at Lodha Group’s New Cuffe Parade project in Wadala. (Source: BloombergQuint)
One of the towers at Lodha Group’s New Cuffe Parade project in Wadala. (Source: BloombergQuint)

But BloombergQuint, in its visit to New Cuffe Parade, found many more residents complaining about the quality of construction. Most of them didn’t want to be identified out of backlash fears. But they had similar problems: delay in possession, lesser-than-promised carpet area, broken tiles and cracked walls, lack of safety measure, improper drainage and defective kitchen fit-outs.

Of the 1,000 homebuyers in the first phase, around 130 have decided to take legal action against the developer by approaching the housing regulator and the consumer forum, said one of the petitioners on the condition of anonymity.

Lodha received part-occupancy certificate for the first phase in June 2017 and the project is not registered under the Real Estate Regulatory Act. Some of the residents have filed a writ petition in the Bombay High Court seeking registration under MahaRERA—a stricter law that protects homebuyers against fraud and misleading claims. The next hearing is scheduled on June 2019.

An open air-conditioner duct at Lodha’s New Cuffe Parade in Wadala. (Source: BloombergQuint)
An open air-conditioner duct at Lodha’s New Cuffe Parade in Wadala. (Source: BloombergQuint)

Compensation

While Lodha Developers mounted a legal defence, it’s offering what the company calls “goodwill compensation” to prevent further litigation. BloombergQuint reviewed the document that offers Rs 4-8 lakh to some of the residents. Once buyers accept the money, they forfeit their right to complain about problems in New Cuffe Parade, the document said.

“We have offered a goodwill amount due to certain delays and issues that were outside our control,” the Lodha spokesperson confirmed. This was negotiated with a governing council representing maximum customers, it said.

“More than 70 percent of the impacted customers accepted it as good faith and continue to live peacefully and collaborate with the Lodha team. That does not make the view of these majority customers as biased,” the statement said. A few thought the amount needed to be much more and are using the media in hopes to get higher compensation which we have refused.”

Two Floors Demolished

Lodha’s problems with the New Cufffe Parade project aren’t recent. A change in civil aviation rules had reduced the maximum height. The developer had to demolish two floors—the buildings now have 43 storeys.

Homebuyers staying in the flats that were demolished approached the Bombay High Court but without success. Prakash Motiwale had booked an apartment on the 44th floor that was demolished. But he is not upset.

“Lodha paid compensation for two reasons: delay in possession; and allotment of a flat on the 27th floor instead of 44th,” said Motiwale who moved into his new home in November. “We received Rs 50 lakh. We are quite happy with the apartment and the amenities provided.”

Motilwale also dismissed concerns over gypsum board walls. “We did found them a bit weak so replaced them with marine ply,” he said. “The concept of gypsum walls is quite new to India, but it is popular abroad. They save a lot of cost, but they are not suitable for rough use, especially if there are kids in the house.”

Monish Babre, another resident who booked his home in 2012 at New Cuffe Parade, disagrees. “To our dismay we saw all internal walls were of gypsum board which was shocking,” he said. Also, wooden flooring is sub-standard, the quality of kitchen fixtures is bad, and open air-conditioner duct poses a safety hazard for kids and pets. “They call it life at its best. But I feel it’s life at its waste.”