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Indian investors cheated out of land in England that never was

Indian investors cheated out of land in England that never was
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First Published: Fri, Nov 20 2009. 06 05 AM IST

Updated: Tue, Mar 17 2009. 05 16 PM IST
New Delhi: The promise of a plot in the idyllic English countryside near London, with an assurance that its price would rocket once regulators rezoned it as residential land, proved too hard to resist for at least 400 investors from India.
Unfortunately for them, it was a promise that was too good to be true.
The investors, some of whom squandered away their life’s savings on the scheme advertised last year, are from among at least 4,500 people who paid a collective £69 million (around Rs514 crore now) to UKLI Ltd, a UK-based land banking company that has since become insolvent and is unable to meet liabilities, according to Deloitte and Touche Llp., the audit company appointed as its administrator.
Besides India and the UK, UKLI had attracted investors from Pakistan, Georgia, South Africa, the US and Canada, and a small number of investors “based in Japan and European countries such as Greece, Sweden and Holland”, Deloitte said in an email reply to queries from Mint. Deloitte said it wasn’t able to provide an estimate of the money invested by Indians alone.
In April, the Financial Services Authority (FSA), Britain’s financial regulator, ordered UKLI to wind up its business “for operating as an illegal collective investment scheme and denying its investors protection for their money”.
By then, UKLI had sold 1,000 acres of agricultural land in 13 sites carved up into 5,000 plots. The land, on freehold ownership, was going cheap because it was not developed. The company promised that it would “lobby” to secure all necessary approvals required to build houses there. Once the approvals came through, the land price would zoom up, it told investors.
Just an illusion: The brochures advertising the plots.
What UKLI did not tell them was that 11 of the 13 sites on offer were in the so-called green belt where no development is allowed under English law, according to a transcript of a creditors’ meeting held on 24 June by the administrator, which is available on UKLI’s website (Uklandinvestments.com). The two not in the green belt—Paddock Wood and Darmans Lane—had “onerous restrictions” in place with little prospect of development being allowed, the transcript said.
FSA is armed with an interim freezing and restraining order against UKLI to protect its assets for creditors, including investors. But FSA warns that UKLI operated an illegal scheme, meaning the investors aren’t entitled to complain to the financial services ombudsman or claim compensation from a statutory fund.
Dream to nightmare
For those who took UKLI’s promise at face value, the dream of owning a piece of English property is turning into a nightmare.
Like the 54-year-old widowed mother of two who invested Rs26 lakh, her life’s savings, to buy two plots after she saw newspaper advertisements in March 2007 promising high returns on land purchases in the UK. The ads were released by UKLI Real Estate Pvt. Ltd, the Indian branch of the UK-based land banking company.
“I approached their office on seeing the advertisement,” said the woman, a resident of New Delhi who declined to be named. She said she chose two plots—400 sq. m in Canary City which, according to UKLI’s website, is within the administrative area of Bromley in south London, and 200 sq. m in Borehamwood, a town in southern Hertfordshire outside London.
“I had saved that money for my kids,” said the investor, who has two children aged 16 and 21. She said she would have to depend on her sisters for help if she doesn’t see the money again.
She said she had approached UKLI’s India office in Gurgaon seeking a refund in August 2007. “They said I will get back my money in 14 days. But I am yet to receive it.”
UKLI’s Indian arm, which ran its operations from an office in Gurgaon near Delhi, has since closed.
The sole shareholder of UKLI is Baljinder Chohan, according to the transcript of the creditors’ meeting. “We believe that Baljinder Chohan is now residing in Dubai, but are not in a position to confirm his fixed whereabouts,” Deloitte said. Phone calls to Chohan or his private assistant, Carrie Lynch, on their Dubai numbers were not answered.
Duped: Raj Kumar Sharma paid Rs5 lakh to UKLI. Ramesh Pathania / Mint
The directors of UKLI Real Estate have distanced themselves from the insolvent parent. Prominent among the directors was Samta Khinda, daughter of Baba Hardev Singh, head of the Nirankari sect, according to some investors. Khinda did not take calls from Mint reporters. Her husband, Sandeep, however, said: “We never had anything to do with UKLI.”
Samta Khinda’s lawyer in Delhi, who requested anonymity, however, said: “She used to be a shareholder in the company (UKLI Real Estate) but has (now) discontinued.” The lawyer did not specify when she had ceased to be a shareholder.
Another company director rejected this claim. “Baljinder Chohan cannot directly open his company in India because he is a UK citizen and so he co-registered the company in Samta Khinda’s name,” said the director, asking not to be named. He, however, said UKLI management based in the UK was taking care of the dues it owed to employees and clients.
“They are sending emails to creditors and employees to settle dues. There is pressure from Babaji to clear the dues,” he said, referring to Hardev Singh.
Profit motive
Greed motivated investors. But some were lucky—or wise—enough to limit their losses.
Raj Kumar Sharma, a resident of Gurgaon, who himself deals in real estate in India, wanted to buy 50 plots in Borehamwood and New Addington. “I was interested in reselling them at a profit,” said Sharma. He paid Rs5 lakh to UKLI as a security deposit. “I wanted to personally verify the property before paying the full price.”
In January this year, Sharma visited the UK. He went to the land registrar’s office in Croydon, the borough under which New Addington falls. The land registrar, who hails from Haryana himself, advised him to stay clear of UKLI. “The registrar told me that in the UK, it is not possible to lobby for land conversion,” said Sharma, who has since been writing to UKLI seeking a refund of his investment.
Another investor, Harkawal Setia, said he figured out the “fraud” when UKLI stopped taking his calls. He had made an initial payment of Rs3 lakh by then.
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.
Investors will, however, not get a refund of their entire investment. “Investors will get a lot less than what they invested...probably 2-3 pence to £1 invested,” Porter said. “We are still working out the refund scheme.”
Few investors from India have got in touch with Deloitte, said Porter. “The records of UKLI are not accurate...some of the addresses of investors are not updated though we have got most of them.”
“It will be necessary for the company’s secured debts to be settled in full, and for preferential claims such as those of employees to be paid, before any distribution of funds can be made to unsecured creditors and investors,” said Keily Hedger, who is dealing with investor queries at Deloitte’s UK office. “It is expected that there will be a small dividend paid to unsecured creditors of the company. However, it remains to be proved that the investors of the company are true creditors. This matter will be addressed when we have the funds to do so.”
UKLI has, meanwhile, shifted base. It is now called UK Land Investments International (UKLII) and has offices in Dubai and Saudi Arabia. “UKLII is solely for international clients based in the GCC (Gulf Cooperation Council), Middle East, Canada and Asia,” says the company’s website (Uklii.com). “The products of UK Land Investments International are not to be marketed to persons in the UK or the USA and as such does not fall under the jurisdiction of FSA, OSC (Ontario Securities Commission) or SEC (Securities and Exchange Commission),” says a disclaimer at the bottom of the website.
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First Published: Fri, Nov 20 2009. 06 05 AM IST
More Topics: Real estate | Investors | England | UKLI Ltd | FSA |