Property scams are not uncommon in India, where cases of unscrupulous developers running away with money collected from homebuyers are a frequent occurrence. But this is probably the first time such a case involving property purchases abroad by domestic buyers has surfaced.
In the UK, large land banking companies such as Land Heritage (UK) Ltd and United Land Holdings went bust in 2006. These companies had also sold farm land to investors by telling them that the plots will gain permission for housing some time in the future.
“More than the need to own a home, it is greed and the desire to see their money grow which makes people invest in such schemes,” Sandeep Singh, director, capital markets, Cushman and Wakefield, a real estate consultant said. “This kind of thing could have happened even within India. People should do a due diligence and use common sense before investing money in these schemes.”
Employees’ plight
Not only investors, UKLI packed up its business without clearing the dues of several employees and vendors also. Even before the India office closed in June, the company had gradually started easing out people, said a 37-year-old former employee of UKLI requesting anonymity. “I was a junior accounts executive and was working in the company since October 2007. I did not receive any notice prior to the termination of my services nor have I got my relieving letter yet.”
He said there were 20-25 people in the Gurgaon office when it closed. Another former employee, who also did not wish to be identified, said UKLI was forced to shut operations because the sales did not take off as expected. “Huge targets were set by the company which were not met,” she said. “In the end, they had to cut down on the expenses and so they started to cut down the staff.”
“Landlord, housekeeping staff, security, etc., had to beg the company for their own money...the company did not have the funds to pay them while some people in the management were very highly paid,” she said.
Tej Singh, who was providing housekeeping services to UKLI at Gurgaon, said he has not been paid since April. “I got an email from the company asking for a scanned copy of the bills due, but I have not heard from them since.”
Unsecured creditors
Meanwhile, FSA in Britain is continuing its investigations and trying to work out a method to repay or improve the value of the investors’ land, according to information on UKLI’s website. “It is their (investors’) land...they can either return the land to the administrators or hold on to their plots in the hope that the land will receive planning permission,” said Keith Porter, one of the persons handling UKLI investor queries at Deloitte’s UK office. “If they return the land, they will become unsecured creditors and the administrators will then pay them dividend payment in return for the land.”
The administrator plans to refund investors’ money by selling some sites that UKLI still owns. According to Porter, UKLI owns 25% each of the 13 sites that it had sold to investors. “Once we sell that there will be a large pot of money left to be distributed among creditors,” Porter said.