Home truths about the Jaypee real estate jinx in NCR

Nothing had changed here since his last visit in July—as has been the case over the last many years. The building structure has stayed skeletal; the basement flooded. There was no sign of any construction. On this visit, Mitroo even spotted a snake.

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The 79-year-old had bought a four-bedroom apartment in one of the proposed towers for ₹89 lakh. That was well over a decade back, in December 2011.

He wanted to move to Noida because the city was less polluted compared to Delhi. There were more open spaces and in this bigger apartment, he could live with his son’s family who were residents of Noida. His grandson’s school was minutes away from the project.

The developer, Jaypee Infratech Ltd (JIL), had promised handover by 2014.

But, by 2014, construction had slowed. There were murmurs that JIL, and its parent company and construction agent Jaiprakash Associates Ltd (JAL), had money problems. Buyers had started holding meetings to discuss the matter. In a few years, their worst fears came true.

On 9 August 2017, JIL was admitted under the insolvency and bankruptcy code (IBC). The National Company Law Tribunal (NCLT), Allahabad, ordered the appointment of an internal resolution professional or IRP, Anuj Jain. He replaced the company’s directors.

Five years later, Mitroo has little clarity on any resolution.

One of the companies to come up with a resolution plan was Suraksha Asset Reconstruction Ltd. The firm acquires non-performing assets that can potentially be revived. Its plan to take over JIL was approved in June 2021. Since then, the case has been with NCLT, awaiting its approval.

The Jaypee saga is one of the biggest in a long line of real estate scandals that rocked the national capital region (NCR), India’s largest property market. Years of unchecked real estate expansion led to the frequent diversion of funds away from projects into other non-real estate ventures and fuelled a land-buying frenzy.

Homebuyers in Delhi-NCR have been the worst affected as a string of large developers—JIL, Unitech Ltd, Amrapali Group and Supertech Ltd—all fell from glory. In Jaypee’s case alone, over 30,000 homebuyers were left in the lurch. Since 2017, when the IRP was appointed, about 8,500 units have been constructed. Before that, around 3,000 units were handed over to homebuyers.

Mitroo is one of the over 20,000 Wish Town homebuyers and real estate allottees still waiting. “My grandson who had just started school when I bought the apartment is in Class XI now,” he says.

The big question: how many years more before he gets the keys? And will homeowners like him see a glimmer of light at the end of the tunnel?

Twists and turns

The township project has many actors. Besides the developer, JIL, there are financial creditors, the Yamuna Expressway Industrial Development Authority (YEIDA), farmers whose land was acquired for the township, and homebuyers. They all have conflicting claims. Ever since JIL entered insolvency, this list of actors has widened to include NCLT and asset reconstruction companies such as Suraksha.

JIL went for the company insolvency resolution process (CIRP) in 2017—this process was supposed to be completed in 330 days. What went wrong? Many of the actors mentioned above played a role in the delay.

The company of creditors (CoC) initially picked the central public sector undertaking NBCC Ltd’s resolution plan over Suraksha ARC. However, the CoC then rejected NBCC’s plan in June 2021 due to non-compliance with certain provisions of the insolvency law. Instead, it approved Suraksha’s plan. But multiple legal challenges remain.

YEIDA, for instance, is arguing against the resolution plan before the NCLT. It has sought ₹6,112 crore in dues, including payment to farmers, in exchange for land that was acquired for Yamuna Expressway development and infrastructure. Claims of ₹461 crore have been admitted by the IRP so far. Secondly, ICICI Bank, a dissenting creditor against the plan, has also asked that its dues of ₹304 crore be paid in cash, and not land parcels.

ICICI Bank and Suraksha didn’t respond to queries and messages from Mint.

Meanwhile, Suraksha, whose resolution plan committed to complete the under-construction homes in a phased manner, has argued that repayment of YEIDA’s dues would make the plan unviable.

“There is a shortfall of around ₹1,500 crore to complete construction, which can be recovered from the assets of the company. The concern? Even if the NCLT rules in favour of Suraksha, it could be challenged before the National Company Law Appellate Tribunal or the Supreme Court. And all this will keep buyers waiting for a long time,” says Ashish Mohan Gupta, a real estate allottee in a Jaypee project. Gupta had bought retail space in the Wish Point project (part of Wish Town) in 2014—the construction hasn’t moved beyond the basement level. Gupta is also the president of JIL Real Estate Allottees Welfare Society.

Around 60-65 hearing or court dates were assigned to the Jaypee case at the principal bench of the NCLT between March 2021 and 22 August 2022. Then, on 29 August, executive committee members of JIL Real Estate Allottees Welfare Society met finance minister Nirmala Sitharaman. They had a simple appeal: law can take its course but not at the cost of homebuyers. Even under the IBC, construction must continue at speed, they appealed.

Since then, the hearings and proceedings have visibly expedited, with nearly 21 hearings in the NCLT until 17 October. The next hearing is on 1 November.

After JIL, JAL

If the expedited hearings are that glimmer of hope, hold on. More legal drama is waiting to unfold.

The State Bank of India (SBI), this September, filed an insolvency plea against JAL, the flagship construction firm of the Jaypee Group, for defaulting on payment of ₹6,893 crore. The application was filed with NCLT’s Allahabad bench. This could be the latest blow for JIL’s waiting homebuyers.

Some amount of construction—albeit at a snail’s pace—is being undertaken in some projects of Wish Town under the supervision of the NCLT-appointed IRP Anuj Jain. The NCLT had allowed construction work wherever possible. In these cases, JAL is the construction contractor. The construction is being funded from customer receivables and the toll fee from Yamuna Expressway, a 165.5 km long access-controlled expressway in Uttar Pradesh.

“If JAL is admitted to the NCLT tomorrow, then our construction will also be impacted. Construction in around 49 towers is ongoing, which is expected to be completed in one-two years. This will get jeopardized,” fears Ashish Mohan Gupta.

Such fear and angst runs across NCR, in properties promoted by other developers.

The victims

On 29 August, Dharmendra Singh stood at a distance and watched as the now famous twin towers of Noida were blown up in seconds, leaving behind a thick cloud of dust.

Singh had booked a three-bedroom apartment in Apex, one of the two towers (the second being Ceyanne), in 2009. Supertech Ltd, the developer, promised possession by December 2012. That never happened and in August 2021, the Supreme Court ordered the demolition of the towers, calling it illegal. This was a classic case where the builder and Noida development authority’s “corrupt officials” were in collusion, violating a string of construction norms.

Singh said that homebuyers were offered apartments in Supertech’s other under-construction projects, where they would have to pay extra money to match the difference in cost. “The project where they wanted us to move in isn’t even ready. What do we do with a piece of paper again? When I saw the demolition from the site, I just thought that the common man and his money are always the victims. There is no law for government officials, building authorities, banks and even builders,” says Singh, who now lives in Ghaziabad.

Singh’s outburst is not uncommon in a region where the rot runs deep. NCR has around 240,000 stuck or delayed residential units worth over ₹181,410 crore, according to Anarock Property Consultants.

The resolution process in many of these stuck projects has now begun and this does offer hope to Singh and the 20,000 waiting homebuyers of JIL.

The clean-up

Puneet Parashar, a happiness consultant, may finally get possession of an apartment he had booked in the erstwhile Amrapali Group’s HeartBeat City in Noida, in 2011. The original possession date was 2014.

Construction restarted over the last year after getting stalled in 2013. Parashar’s flat delivery is now scheduled for this year. NBCC, which was appointed by the Supreme Court in 2019 to complete and deliver more than 20 stalled residential projects of Amrapali, has already started deliveries in certain projects. By June 2024, NBCC is expected to deliver over 46,000 units.

Property consultants say that the implementation of the Real Estate (Regulation and Development) Act, (RERA) has somewhat accelerated the clean-up act in Noida and Greater Noida.

This year, Kalypso Court, a part of Wish Town promoted by JAL (not JIL), became the first project to be completed under the rehabilitation clause of the Uttar Pradesh-RERA. This clause allows the regulator to take up an unfinished project and direct it towards completion.

In the Kalypso Court case, the developer and homebuyers approached RERA, seeking a rehabilitation plan, after part of the project was stalled due to financial constraints. RERA then set up an escrow account for completion. The builder paid ₹45 crore and homebuyers paid their dues through installments.

“Projects are stalled due to various reasons, including money being siphoned off, buyers not paying because of delays, and mistrust between builders and allottees. RERA has tried to inculcate confidence among both parties,” says RD Paliwal, a conciliation consultant with UP-RERA.

UP-RERA has undertaken 15 such cases, mostly in NCR. Orders have been issued and committees have been formed.

Meanwhile, the central government has upped the ante, too.

In November 2019, the government announced a ₹25,000-crore fund—the Special Window for Affordable & Mid-Income Housing (SWAMIH)—to help complete over 1,500 stalled residential projects comprising 4.58 lakh housing units across the country. In February 2022, a SWAMIH spokesperson said that final approvals have been given to 105 deals to complete 61,000 homes. Preliminary approvals have been given to 144 deals for completing another 85,000 homes.

“Many projects which were struggling for last-mile funding have got a lease of life from the SWAMIH fund,” says Manoj Gaur, president of Credai-NCR, an industry body. “The main problem is with projects that are stuck in the NCLT or are mired in insolvency. Another category of projects facing difficulties are where development authorities like YEIDA or farmers are involved,” he adds.

40 months

Tina Tandon and her husband Siddharth Goel booked an apartment at Wish Town’s Krescent Homes project in 2012. Like many others, the young couple were drawn in because of the brand, and space it promised. Their 2,100-sq ft apartment came with a price tag of ₹85 lakh. It was a golf course society; multiple people at Goel’s company had booked flats there; the builder said the project was selling like hot cakes. And then, everything went downhill.

“It is difficult to sell an apartment where construction has stopped and the developer has been declared bankrupt,” Tandon says. “Banks blacklist them and don’t give loans for the property. Thank god, we could buy another house. But there are so many people who invested their life’s savings and continue to stay on rent,” she adds.

Tandon and other JIL homebuyers don’t care who is in the driver’s seat, as long as a decision is made by the NCLT soon.

If Suraksha’s resolution plan is approved, the last apartment would be delivered in about 40 months from that date—that is the company’s promise. That’s still quite a wait but could count as that glimmer of hope.

“Buyers are okay with anyone constructing. We just want the plan to be passed and construction to restart. But we feel our matter will attain finality only in the Supreme Court,” Gupta, the real estate allottee at JIL, says.