Save 25000 home buyers of Jaypee Infratech's WishTown from impending bankruptcy
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June 21, 2017
Shri Mahesh Kumar Jain
MD & CEO.
IDBI Bank Limited
IDBI Tower, WTC Complex,
Cuffe Parade, Colaba
Mumbai 400 005
Reg:- Plight of about 25000 Homebuyers of Jaypee WishTown, Noida, U.P., developed by Jaypee Group.
Ours is a registered home buyers welfare society of Jaypee Wishtown Noida.
Based on newspaper reports, we understand that Reserve Bank of India has instructed the lending banks to Jaypee Infratech Limited to file an application under Insolvency and Bankruptcy Code (IBC) with the National Company Law Tribunal (NCLT) within next one month.
In this regard, please consider the following points before taking the final decision for filing of your application under the IBC, against Jaypee Infratech Limited :-
1. Jaypee group launched Wishtown properties from 2007 onwards. However only about 5000 units have been handed over to the buyers and over 25000 families are still awaiting delivery of their homes.
2. You will be aware that Jaypee group has repaid probably the largest amount to lending banks among all NPA accounts. Their loans were also restructured and It was also announced by SBI that Jaiprakash Associates Limited has now manageable debt of Rs. 6000 crores and is now out of the NPA list. Therefore they have demonstrated their willingness to repay the banks.
3. Jaypee Infratech owns the WishTown so it should be able to repay loans from likely receipts of 6-7000 Crores from balance payments of unfinished projects of Wishtown and also by selling their other assets.
4. Recently Jaypee arranged fresh funds of about Rs. 1800 Crores including their own contribution and loans. Construction of the stalled housing units were restarted and 25000 buyers had a renewed hope that they will get their homes sooner or later. But our hopes are now shattered to see name of Jaypee Infratech Limited in the list of 12 NPA accounts released by Banks.
5. The sorry state of real estate sector especially in UP., is the direct result of organised loot of buyer’s money by State ruling party politicians and bureaucrats managing the Area Development Authorities.
6. Banks are also responsible because they granted massive loans to builders for building projects which could have been easily completed in ‘Self Financing’ mode from funds of Home buyers. Thus first they financed builder to build and then financed buyers to buy and so did double financing of projects. They also shirked their responsibility by not monitoring funds useage and timely completion by builders.
7. The delays in project completion have resulted in only the Home Buyers footing the bill of all above. Today they are bearing the burden of additional interest on bank loans, home rents and tax benefit losses, for the delayed construction. In fact some projects are undelivered even after 10 years of launch. Further proceedings under IBC will completely ruin the Home Buyers as Wishtown is owned by Jaypee Infratech Limited.
8. With due respect, we may state here that invoking bankruptcy against Jaypee will only compound the problem. Bankers will not be able to get buyers easily for stalled and debt laden real estate projects and that too at a good price. If at all you do, you will be able to secure only a fraction of your dues. However due to this all home buyers will be ruined as their hope of getting their homes quickly will vanish. The time duration of process and legal issues of the new builder taking over and starting construction will be very very long (if at all that happens)
9. Banks should also consider that in the above scenario, the harassed buyers may well refuse to repay bank home loans. Thus the banks will create 25000 new NPAs by settling one NPA. The situation is very grave and we fear that home buyers may start taking other drastic measures like organising Dharnas, legal action and or I hope and pray not the suicidal route taken by farmers.
10. Homebuyers of bankrupt builder will be ruined as all the money paid by them to the builders is classified as Unsecured Loans having the last charge on recoverable monies. So chances of recovering their investments will be bleak to say the least.
11. To avoid ruining thousands of home buyers and resulting implications therefrom, it is imperative that all delayed projects are completed quickly. Bankruptcy and or prosecution of builders can be a punishment to builders but their meagre punishment as per law will not solve problem of homebuyers and may not be a good solution to the problem.
12. Completion of delayed projects can be achieved quickly only if builders have sufficient funds for completing the project, so we request that:-
a. Banks must provide soft loans to Jaypee Infra quickly and restructure its debts, to the extent that shortfall of funds needed for completion is addressed with sufficient safeguards like Escrow accounts. Banks and Homebuyers should be part of regular monitoring of fund usage and construction progress. Jaypee should be able to repay loans from likely receipts of 6-7000 Crores from unfinished projects and also by selling their other assets.
b. Noida Authority and Yamuna Expressway Industrial Development Authority must withhold collection of their dues of about 1100 Crores, till all WishTown projects are completed. Let the builders use the money for completion. If the Local Area authorities could wait so far due to shady reasons, they must now wait for few more years.
c. Buyers of all delayed projects must be given moratorium on EMI payments till their properties are handed over. Interest paid by home buyers for the NGT blockage period should be reimbursed to buyers by Noida Authority, as it was responsible for the NGT mess.
d. Kindly note that we are not asking for Loan Waiver.
e. Banks must also bear the interest on EMIs for the moratorium period as they are also responsible for this situation. They have already earned lots of interest from builders and also from homebuyers, so can now bear this additional burden which will be far better than facing thousands of NPA accounts.
I hope you will realise our predicament and accept our just demand and order for its speedy execution.
With kind regards,
For Developers Township Property Owners Welfare Society
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