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| Hill County an uphill task for IL&FS |
| B Ramakrishna / Chennai/ Hyderabad Jun 06, 2011, 00:18 IST |
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The residential-cum-SEZ integrated township project may miss the deadline by six months.
The Rs 1,100-crore Maytas Hill County project may take up to six months beyond the 18-month deadline set by the Company Law Board when, in January this year, it inducted the IL&FS group as the new promoter of troubled Maytas Properties. It could also face cost overruns of 15-20 per cent.
Maytas Properties’ new chairman Arun Saha said the project was a good one but was mired in problems under the previous management. “It’s such a large project, nothing can happen overnight. For whatever reason, it has had problems with the Central Bureau of Investigation (CBI), Serious Fraud Investigation Office (SFIO), Hyderabad Metropolitan Development Authority (HMDA), income tax authorities — almost every regulator is involved,” he said.
The residential-cum-SEZ integrated township project located at Bachupally on the outskirts of the city involves close to 900 apartments in nine blocks and 275 independent houses on a 160-acre site. The company had collected at least Rs 830 crore from around 900 buyers, and was originally scheduled to deliver the ‘world-class’ project by March 2008.
The accounting fraud at Satyam which came to light in January 2009 hit Maytas Properties hard, as it was one of the firms (along with Maytas Infra Ltd) the IT company had tried unsuccessfully to acquire. Being closely linked to the Satyam scandal added to the burden of being promoted by Raju’s family.
At one stage, the company was given a notice by the Andhra Pradesh High Court on a complaint by a couple of customers. It had also tried to get additional funds from venture capital sources through its well-connected customers.
When the Mumbai-based infrastructure company took over Maytas Properties, the project had been stalled for two years. “There are many things which were not contemplated when we took it over. The buildings part of it was incomplete for three years. There was a lot of water logging and we were advised to go for a structural test,” Saha said.
Work thus far
The work on apartment blocks has started now, and some 65 villas have been fully built, according to Saha. In a letter to the customers, the company said completing the project within the stipulated time line was not an easy task. “We have quite a few hurdles to overcome before achieving our goal,” it said.
Among them is getting back the buildings mortgaged to HMDA and land attached by the income tax authorities. On this, Saha said things were falling in place and they were hopeful of getting these released soon.
“Some completed villas are mortgaged to HMDA pending some infrastructure works like electrical and drainage systems at the project. We have made progress in the required works since we took over the project. We have requested release of these villas so that they can be registered,” Saha said.
“The project has got some part of the land which was taken on long-term lease from certain families. They had some income tax dues. We have paid Rs 25-30 crore, plus interest and penalty. The land attached is 20-30 acres. It has built villas standing on it, which would be registered once the IT department releases it,” Saha said, refusing to give a time frame for the release.
Priority in allotment
According to Anilkumar Katakam, who represents the Hill County Home Owners’ Welfare Association, up to 20 customers had paid “more than 100 per cent” of the cost of their villa/flat to get the project going, when it was under the previous management. Such customers would get priority in allotment of the homes as the project progresses. The cost of apartments starts from Rs 50 lakh, while villas cost an average of Rs 2 crore depending on the area and other parameters.
The company said it would also address the issue where some customers had incurred costs on litigation because of the delays in apartments.
While the CLB deadline of 18 months applies only to the Phase-I of the project, which covers the residential part, the Phase-II involves the special economic zone. Saha said, “Our objective at the moment is to put our resources on the part of the project where customers are involved. We will think about the SEZ part later, when we make some progress here.”
He said the company was also considering reducing the area of the special economic zone from 55 acres to somewhere in the range of 30-40 acres, with the rest used for non-SEZ purposes. It was seeking feedback on this, Saha said.
On this, Katakam said, “The SEZ is an option we would like to keep. Without it, the valuations would go down. How much of it is feasible, we need to see.”
Yet another issue concerns the claims of a Mauritius-based investment firm, SRS Orion. It has filed cases in the AP High Court and the Supreme Court reportedly seeking an equity partnership and a presence on the governing board in return for the money it had lent to the company under the previous management.
According to Saha, SRS Orion had invested Rs 600 crore in Maytas, a part of which was said to have been used in the Hill County project. IL&FS’s position is that it would repay the money.
The buyers seem to be relieved that some progress is at last happening. “By what time the whole project would be completed is the million dollar question. Ultimately it is the CLB which is protecting us,” said Katakam.
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