Sink or Swim – Pay It Back Regardless

09.09.2016 • Emerging Markets

From Vivek Kaul’s Diary (India) –

A few years back, briefly for a period of two weeks, I thought I had the makings of a Hindi film script writer. I even got around to sketching the basic outline of a romantic comedy around a credit card defaulter and a bank manager who is trying to sell the defaulter a unit linked insurance plan (I guess that bit came from the fact that I used to write a lot on personal finance during those days and unit-linked insurance plans were being mis-sold left, right and centre, at that point of time. Talk about real life becoming a filmi inspiration).

Like often happens in these cases, more important things took over. And that was that.

Nevertheless, I still think I have the ability to spot a story which would make for a good Hindi film. Events that have happened over the last few days lead me to believe that there is good story brewing, which can clearly act as an inspiration for Khosla ka Ghosla 2.

Khosla ka Ghosla was a sleeper hit which released in 2006, a decade back. The movie was set in and around Delhi and the main character in the movie is called Kamal Kishore Khosla. He owns a piece of land on which he hopes to build a house for his family someday.

This land is usurped by a powerful property dealer called Kishan Khurana. This leaves Khosla high and dry, without any land and extremely disappointed. But like any average Indian he comes around to the idea, by blaming his fate for it.

In the time to come Khosla’s elder son, along with another property dealer who has a score to settle with Khurana, and a bunch of theatre artists, come together and ensure that Khosla gets his land back. In the process they also take Khurana for a ride without him knowing about it and by the time he figures it out, it’s too late.

The fact that the story revolved around small guys taking on a big bad individual, gave it that winning feel, which many Hollywood biopics tend to have.

Over the last few years, real estate companies in and around Delhi, sold homes to people. The payments were made by the buyers and the possession was to be handed over in the years to come. The years have gone by but the homes are yet to be handed over.

Hence, the buyers are stuck. In many cases, they continue to pay the rents of the homes they live in and the EMIs for the home loans they had taken on for the homes they had hoped to live in.

A few of these buyers have gotten together and taken the real estate companies to court. Some of these cases have recently reached the Supreme Court. Last month, Unitech and Parsvnath Developers told the Supreme Court that they had no money to pay the buyers whose homes had not been delivered.

This week the Supreme Court directed the builder, Supertech, to repay money it had taken from buyers in a Noida project and had been unable to deliver on time.

“You sink or die, we are not concerned. You will have to pay back money to homebuyers. We are least bothered about the financial status,” the Court told the company.

In August, the Supreme Court had directed Unitech to refund Rs 15 crore to a group of buyers who bought homes in projects and Gurgaon. These projects have been delayed.

A recent report in The Economic Times points out that: “A search on the Delhi High Court website revealed more than 40 cases pending against real estate developer Unitech Ltd. On the website of the National Consumer Disputes Redressal Commission (NCDRC), 929 entries came up on searching for Unitech.”

The question is if companies had taken on money from buyers to deliver homes, where did that money go? Was that money siphoned off? Or was it used to build earlier projects?

If it was used to build earlier projects, where did the money collected for earlier projects go? So, somewhere down the line, some money which was supposed to be used for building homes was used for something else.

Up until now, this was not a problem because the builders could always launch a new project and use the money collected against that project to complete an existing project. Now buyers have largely caught on to this game and stay away from new projects. Hence that regular money flow has dried up.

But the question still remains, where did the money go. As Business Standard newspaper writes about Mohit Arora of Supertech, the latest company to have faced the ire of the Supreme Court: “Even Arora, whose company is the latest to be slammed by court, told this newspaper, “judiciary is sending a strict signal to all developers and it may help improve the scenario”. But he adds, “Not everything is our fault” as there is just no cash in the system [emphasis is mine].”

But where did the cash go? No real estate company has bothered to answer this basic question. Not that the media has bothered to ask.

My guess is that with the Supreme Court breathing down the neck of builders, more buyers with homes which have not been delivered, will take builders to court. And that will be a good development.

In order to generate cash, the builders will have to sell out on the inventory that they are holding out on by cutting prices. It will also force some of them to sell their land banks leading to a fall in land prices. This will ultimately have an impact on home prices as well, given that land is the biggest input into building apartments.

And that leaves us with Khosla ka Ghosla 2. The fight started by a small set of homebuyers against big builders by taking them to court, could make for a very interesting film script. It has all the right elements of a good David versus Goliath kind of story.

It starts with a dream getting fulfilled-a middle class Indian finally gets around to buying a home. Then the dream comes crashing down with the builder delaying the delivery.

Then the problems start. Along with the rent, the home loan EMI also needs to be paid. The finances are really stretched. The landlord is breathing down the neck. He wants a new tenant.

And so the story goes. Then a small set of buyers come together and take the builder to court. The builder gives them more trouble and sends in some goons to get them to withdraw the case. The homebuyers don’t budge. Finally, it ends happily, with the court coming to the rescue. A couple of love stories that brew between homebuyers can also be thrown in.

The money is repaid. Meanwhile, the real estate prices have fallen and this allows the homebuyers to buy homes which are fully ready and already available in the market. Don’t we all love the underdog coming out on top?

I know the end sounds like a dream. But what is a Hindi film without a Happy Ending!

And I do hope some scriptwriter reads this.

-Read more at (English)-

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