Hurdle to Emaar bailout, DDA seeks bank guarantee

The cash to be issued as an interim bailout from the government to Emaar MGF for next year’s Commonwealth Games is ready for issue, but awaits a bank guarantee.

The Union urban development ministry has sanctioned issue of a first instalment of Rs 100 crore agreed on to the cash-strapped firm, but Delhi Development Authority (DDA) first wants the guarantee.

Emaar MGF is the developer of the Commonwealth Games village. It was to finance the construction by taking deposits for sales of two-thirds of the 1,168 apartments to be built to house the athletes -- those who booked are to get the flats after the Games. The remaining flats were to go to DDA, which would sell these separately.

However, Amaar has run into money problems and the flats are not ready. Residential prices in major cities across the country have dropped, as demand has seen a sharp slump. Emaar wanted Rs 12,750 per sq ft from flat buyers; it got few takers.

In December, it wrote to DDA, saying it needed another Rs 1,000 crore to complete the project. It had, it said, already spent Rs 1,400 crore.

The government is yet to take a final decision on the request. It has agreed only to a first instalment of Rs 100 crore, pending a decision on how many flats DDA will buy from Emaar’s two-thirds share. A decision on how many will be taken after a four-member valuation panel gives its proposal. The cost of each flat is yet to be agreed on, as they aren’t ready; barely 40 per cent of the work on site was completed as of March 31. Which is why DDA wants the gurantee.