Realty projects sink taking home buyers down, insolvency code may offer hope

It was a dream for Kottayam native Jojo Joseph and wife Jincy Mathew to own an apartment in Kochi city.
Realty projects sink taking home buyers down, insolvency code may offer hope

KOCHI: It was a dream for Kottayam native Jojo Joseph and wife Jincy Mathew to own an apartment in Kochi city. They zeroed in on an apartment project being developed by one of the leading real estate firms in the state, Mir Realtors Pvt Ltd, and made a part payment of Rs 30 lakh between 2012 and 2015 for the apartment costing Rs 62 lakh.

More than six years have gone by and the couple is yet to get delivery of the apartment which was promised to be delivered by 2018. Whenever the couple enquired about the status of the project, the firm assured them that the apartment would be delivered soon.

However, to the couple’s shock, a few months ago, they found the real estate firm was declared ‘insolvent’. All this while, the realty firm had kept them totally in the dark about it. “They never revealed the insolvency process they were undergoing whenever we enquired about the project status. In fact, the company was cheating us,” said Jojo.

This is not a lone case. Over 500 home buyers in Kerala continue to remain uncertain about lakhs of rupees they have invested in housing and apartment projects of a few established real estate companies in the state which are either facing insolvency or criminal offences for delaying to deliver projects as promised.

While MIR Realtors and Nucleus Premium Properties Pvt Ltd have been facing insolvency, Nest Infra Tech has been accused of delaying a project after accepting money from a few consumers. Another company, Samson & Sons Builders, is facing insolvency procedures for its Thiruvananthapuram project. Nucleus Premium Properties alone has a total of nine projects in Kerala -- one each in Kottayam and Thiruvananthapuram and seven in Kochi -- comprising a total of over 200 home buyers.

K P Dileep, the insolvency officer appointed by the National Company Law Tribunal (NCLT) in the Nucleus case, said the new insolvency and bankruptcy code offers hope for the home buyers. “Under the code, the directors of the company have been removed, and a new management will take over through bidding. In the case of Nucleus, we will invite bidding on March 24, which will be open till April 9,” he said, adding that the bidding companies are required to submit a resolution plan on how they plan to complete these projects.

He said 95% of the voting rights to select the new company are vested with the home buyers of the project. The entire process in which the new company takes over and starts to execute the unfinished project should be over in six-nine months, as per the insolvency code. Despite repeated attempts, a top official of Nucleus Premium Properties didn’t respond to the calls or queries.

As far as Nest Infra is concerned, it courted trouble after a consumer approached police with a complaint stating that the company had not yet delivered a project which was promised to be completed in 2014. “The company cheated me. They sold us a property that didn’t have any approval or clearances from the government. Almost half of the land to be developed was later found to be classified as either paddy land or wetland as per revenue records. After delaying the projects for over eight years, it was only a few months back that they got the land documents corrected. Still, they are yet to complete the amenities promised in the project,” said complainant Anup Palamadathil.

As per the FIR, the company had collected a total of over Rs 1.3 crore for the two villas booked by the complainant and his brother in the project called ‘Nest World Villa’. When contacted, MIR Realtors managing director K Arun Kumar blamed it on the Covid-induced economic crisis for the issues including insolvency procedures being faced by his company.

“We were undergoing a bad phase following the lockdown and Covid crisis. Our project got delayed due to a fund shortage. We were also in bad debt. We are on our recovery path and will complete the projects for delivery soon,” he said.

One of the directors of Nest Infratech denied the allegations of cheating saying that the particular project got delayed only due to Covid-induced economic crisis. “The lockdown and Covid crisis delayed the project. There was an error in the land documents and it was corrected through the established procedures. We have completed all individual villas for which money has been paid by consumers in the project and even many have occupied the villas. Only the work of a clubhouse is pending at the project site and we will complete it soon,” said Shamsudeen of Nest Infra.

Realtors in the dock
While MIR Realtors and Nucleus Premium Properties Pvt Ltd have been facing insolvency, Nest Infra Tech has been accused of delaying a project after accepting money from a few consumers. Another company, Samson & Sons Builders, is facing insolvency procedures for its Thiruvananthapuram project

To be concluded

A slew of realty projects where over 500 home buyers are involved came to a standstill in Kerala in the last 4-5 years. While some of them filed police cases for cheating, others approached the National Company Law Tribunal, which declared at least four companies insolvent. TNIE, in a two-part series, looks at the woes of home buyers and how the new insolvency and bankruptcy code offers a glimmer of hope for them

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