New Delhi: The agony of thousands of homebuyers of various projects of the bankrupt Jaypee Infratech Limited may end soon after a week-long voting process threw up NBCC Limited as an overwhelming favourite to complete the under-construction assets. Pitted against a consortium of Suraksha Realty Limited and Lakshdeep Investments and Finance Private Limited, the state-owned company secured 97.36% of the votes that had 13 lenders and over 12,000 homebuyers participating in the exercise.
The projects, many of them lying along the 167-km-long Yamuna Expressway, are based in Noida, Tappal, Jaganpur, Agra and Mirzapur in Uttar Pradesh.
Jaypee Infratech is one of the twelve companies that figured in the first list the Reserve Bank of India had sent to the banks in June 2017 to initiate bankruptcy proceedings against under the newly minted Insolvency and Bankruptcy Code, 2016 (IBC). The case was admitted in the insolvency court for resolution two months later.
The total claims against the company admitted by the court-appointed professional to oversee the insolvency resolution, amount to ₹23,176 crore. Of this, ₹9,783 crore are owed to banks, ₹13,364 crore to homebuyers and ₹29 Crore to fixed deposit holders of securities issued by the company.
The resolution of the case would be a big relief for thousands of middle-class families who have had their money, ranging anywhere between ₹10 lakh and ₹50 lakh, stuck for as many as eight to nine years. They can now hope to get their dream asset in nine to 42 months as promised by NBCC.
NBCC will pay homebuyers a penalty of ₹5/square feet in case the delivery of the house is delayed beyond 12 months of the deadline promised. The company, known more for its project management consultancy, has secured a ₹2,000 crore credit facility from HDFC Bank to undertake the work. One condition that could frustrate the homebuyers is that they will have to bear the cost of any compensation that may have to be paid to farmers.
The Navratna company will hand over the lenders 1,526 acres of land worth ₹5,000 crore. It will also hive off the toll road (Yamuna Expressway) as a separate special purpose vehicle and hand that as well to the banks.
The Jaypee resolution was an acid test for the viability of the IBC as it pitched homebuyers, with small amounts of money stuck, against the might of the financial creditors led by IDBI Bank who had crores at stake. This led to the case going far beyond the 270-day deadline within which all IBC cases need to be resolved. That sunset had lapsed on 12 May, 2018. There were originally 21,781 home buyers who filed case against the company.
The battle between banks and homebuyers on who should build the flats led to the IBC being amended with home buyers also being recognized as financial creditors and thus getting the same status as banks at the negotiations table.
The Jaypee case is a perfect example of the challenges infrastructure projects face in the country. Led by an ambitious promoter, the company tried to capitalize on the housing boom of the last decade and launched several projects to cater to various income groups. But the 2008 financial crisis sucked out liquidity. It was also the time environmental concerns began to gain currency and the green tribunal clamped down on construction in the Noida region at it lay near a bird sanctuary. More uncertainties, amidst a tightening of money supply, led to people pulling out. Real estate was no longer an asset for returns.