October 31, 2017

 

Demonetization has unraveled a deeply fraudulent loan practice that existed in the real estate sector wherein builders, in collusion with banks, got individuals to take loans posing as buyers (home loans to private individuals come at a cheaper interest rate), and thereafter channeling the disbursed amount into their businesses.

The modus operandi goes like this: Mohit Saxena (31), father of an infant, urgently needed money in 2015. He owed numerous loans for his mother's treatment, his sister's and his own marriages. Two agents, Nandan Jha and Ajay, of a particular builder came to Mohit with a proposal to obtain a bank loan for them, promising Mohit 4-6 per cent 'cut' on the total disbursed amount. The EMIs were to be paid to the bank by the builder, but through Mohit, the official loan-taker.

To Mohit's surprise, the builder created three loan files instead of one. Out of greed, he signed the loan documents. The agents assured him that the loan is going to be repaid in two years flat. So, Mohit went ahead with three home loans totalling to Rs 1.5 crore, the EMI for which was Rs 1.5 lakh a month. Mohit's monthly salary is Rs 50,000 and his wife, then working, is now without a job.

Within a few months, Mohit started getting calls from the bank as the builder had stopped paying the EMIs. Caught in a terrible debt trap, Mohit attempted suicide twice. "First, I tried to jump before a Metro train, but a fellow traveller pulled me back. After that I tried to hang myself," he said. "After demonetization, the builder has stopped paying the EMIs for all the three loans… loans which are in my name. I don't know what is going to happen now and how could I possibly repay a Rs 1.5-crore loan with a monthly salary of Rs 50,000."

Banks give loans to builders at an average interest rate of 14-18 per cent, while private equity funding charges 20-25 per cent. Hence, builders had resorted to the fraudulent practice of using 'ghost' home-buyers to get loans on their behalf, promising them a percentage of the disbursed amount and assuring that EMIs will be taken care of.

"There are 70-80 victims like me in the same project of JSS Buildcon," Mohit revealed. Ritesh Sharma, another 'ghost' buyer, claimed: "Almost all builders indulge in such loan-packaging fraud".

Around 95 builders, including Amrapali, ATS, Supertech, Shubhkamna, JSS Buildcon, Unitech and Omaxe were on Greater Noida Authority's defaulter list as on July 2017. Sources said that most builders had used ghost buyers. Sharma said, "Let's audit the finances of each and every project, and especially those who defaulted with the authorities".

Vice-chairman of National Real Estate Development Council (NAREDCO) Parveen Jain, said, "If ghost buyer thing is going on, then a proper verification procedure should be in place so that this thing does not happen. In today's scenario, it seems very difficult for such a thing to happen because of fool-proof identity systems prevailing… until and unless the parties involved are hand-in-glove. Also, the ghost buyers should not fall for this because if the developer abandons them midway, the ultimate sufferers shall be the ghost buyers themselves."

The Confederation of Real Estate Developers Association of India (CREDAI), refrained from commenting. To queries sent by DNA, it said, "We follow ethical practices, therefore commenting on such topic is out of the question. Hence, we regret that we would not be able to share the response in this regard".

ATS Group's CMD Getamber Anand told DNA: "It is important for all investors in real estate to understand that the market is cyclical and wherever they have invested and the projects are complete, there is no reason to worry because no funds have been diverted. Being on the defaulter list is one thing but insinuating that our company has indulged in this activity amounts to accusing us of something we have never done."

RK Arora, CMD of Supertech, said: "We have not indulged in such ghost buyer practices, but yes, we offer subvention scheme where buyer pays 7-8% of total cost and rest on the possession of the property, and no EMI until possession."

In a Whatsapp message, Omaxe denied indulging in any such practice. Emails and messages sent to the other builders went unanswered. DNA will publish those responses as and when they come.

'Ghost' buyers get used in two ways: First, builders get cheaper loan when compared to commercial lending rates; and second, they help create a 'sold out' tag which helps builders bid more for their property.

For banks, 'ghost' buyers are a medium through which loans are channelized to commercial entities at lower rates meant for home-buyers. "It could not have happened without the active participation and guidance from well-placed banking professionals," said Sanjay Sharma, MD, Qubrex Realty, a real estate exchange.

One such loan-taker told DNA: "A bank executive asked me: 'kya builder ne EMI dena band kar diya hai (has the builder stopped paying your EMI)? It shows that banks are well aware of this fraudulent practice."

RBI data show that out of a total of Rs 2.5 lakh crore new loan disbursed by banks in 2016, over Rs 1 lakh crore was given to the housing sector alone. Credit growth to industry as a whole has been 4.5 per cent, while for housing it has been almost 15 per cent.

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Source: DNA India