Dubai-based real estate firm Emaar Properties PJSC and India’s MGF group have decided to part ways after a decade-old joint venture in India, Emaar MGF Land Ltd.
In a notification to the BSE, Emaar MGF said the board in its meeting on April 11 decided to take steps for re-organisation of the company through a ‘Scheme of Demerger’. This is subject to the approval of the shareholders, creditors and relevant regulatory authorities.
Emaar issued a statement from Dubai saying that to lend greater focus on its operations and to develop the potential for further growth and expansion of the business, Emaar Properties agreed to take steps for the reorganisation of Emaar MGF.
“This reorganisation will enable Emaar to implement focused strategy for its real estate business in India and will allow the business to undertake future expansion strategies. It will also enable Emaar to drive the development of ongoing projects in India,” it said.
Emaar Properties, developer of the world’s tallest tower Burj Khalifa, entered India in 2005 as a joint venture with MGF group. It has invested about Rs 8,500 crore in the Indian real estate market so far.
Company sources said Emaar MGF would be demerged into the two separate entities with both the partners deciding to part ways. The market was abuzz with the JV being called off since last year but there was no official confirmation till now. Emaar Properties and MGF group have nearly 49 per cent stake each in the joint venture firm.
Emaar MGF Land, headquartered in Delhi, started operations in India in mid-2005. It is engaged in residential, commercial, retail and hospitality projects across Gurgaon, Chennai, Hyderabad and Indore among other cities. The joint venture company has a land bank of about 8,000 acres. Emaar MGF has also constructed the Commonwealth Village in Delhi.
The JV’s stint in India was mired in controversies. The Enforcement Directorate (ED) in 2013 had slapped a showcause notice on Emaar MGF Land for violation of the Foreign Exchange Management Act (Fema) to the tune of Rs 8,600 crore. The company was accused of using foreign funds to buy farm land.
An ED statement said the directorate had noticed since April 2005, funds to the tune of Rs 8,600 crore were received by this company and its four subsidiaries from Dubai, Cyprus, Mauritius and other countries under the foreign direct investment (FDI) scheme of the Reserve Bank of India (RBI).
In September 2012, in a separate case, ED had attached properties owned by Emaar MGF in Delhi and Hyderabad for alleged violation of the Prevention of Money Laundering Act. The order was related to the Emaar Hills Township case in Hyderabad, where the company had allegedly sold plots for up to Rs 50,000 per sq yard but showed the sales at Rs 5,000 per sq yard in its books, resulting in revenue loss to the government. The company has also been under Central Bureau of Investigation scrutiny in the Emaar Hills Township case. Also, there were controversies related to the Commonwealth Village in Delhi due to delays and alleged violation of permissible floor area with excess construction in the project.