If the following example is to be used to predict the future of sales in the real estate sector, then the future appears to be gloomy.
The LIC Housing Finance Limited yesterday issued a public notice claiming that Orbit Corporation had defaulted a loan of Rs 96 crore and the finance institution had classified their account as Non-Performing Asset (NPA). It even issued notices to the borrower from creating a third party interest in the mortgaged property. Orbit Corporation had mortgaged property admeasuring 2.41 lakh sq ft.
The notice issued to the firm reads: ‘Orbit Corporation availed loans from the LIC Housing Finance Ltd by executing various securities and other documents, and created security by way of mortgage of the properties.
The loans are also secured by the guarantees executed by Ravi Kiran Aggarwal and Pujit Aggarwal, the directors of the company. In view of the defaults committed by the borrower and the guarantors in the payment of instalments of principal, interest, etc., their account has been classified as NPA and notices have been issued to the guarantors and borrowers.
The amount due to LIC Housing Finance Ltd on the said loan is Rs 96 crore as on June 30. This is to notify and caution the public in general that anybody dealing with the said mortgaged securities shall be doing so at their own risk and subject to the charge of LIC Housing Finance Ltd for its dues mentioned above.”
The total area mortgaged by the Orbit Corporation comprises 25,670 square feet of Orbit Grand in Elphinstone near Deepak Cinema, 1.70 lakh square feet of Orbit Residency Park in Andheri (East) and 45,600 square feet of Orbit Midtown in Lalbaug.
Apart from this, the lender expects receivables from seven projects of Orbit: Orbit Arya, Villa Orb, Orbit heights, Orbit Eternia, Orbit Grand, Orbit WTC and Orbit Residency Park.
Despite repeated attempts, no one from the finance institution was available for comment. Even emails went unanswered.
Commenting on the issue, experts said the builders were paying for their own misdeeds.
Pankaj Kapoor, managing director of Liases Foras, a real estate rating firm, said, “People need to understand that it is off-balance economics of real estate.
Developers are holding on to inventory with unproductive prices, market has to undergo correction and these are basically results of un-economic prices.
Speculative realty prices created wealth assets (real estate) but these assets didn’t perform and hence builders couldn’t repay the money to those from whom they had taken it. The real estate prices are not affordable. While realty prices increased, the affordability didn’t.”
Ajay Chaturvedi, CEO of Accommodation Times, claimed that this was just the beginning of the downturn in the realty market. “When such big builders can’t repay their debts, we can’t even imagine what would be the condition of the small builders.”
The Other Side
Ram Yadav, Head of Strategy and Finance for Orbit Corporation, said, “We have been regular in paying the loan amount. However, certain technical issues such as not permissions for certain projects delayed the payment. In the last 45 days we made certain payments to the banks and it wasn’t a wilful default. In the coming six months, we would repay the amount. There’s nothing wrong with the organisation and the default is purely because for certain period there were delays in permissions from the authorities. And our project got delayed by 18 months. The total amount of loan was Rs 250 crore and we paid Rs 154 crore. The rest would be paid within six months. LIC Housing Finance Ltd has cooperated with us a lot and we will repay the loan soon.”