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Games bailout: DDA to buy Emaar flats

After some dilly-dallying,the Delhi Development Authority on Monday announced that it would buy 333 flats in the Commonwealth Games Village from the cash-strapped developers,Emaar-MGF.

Written by Mandakini Gahlot | New Delhi |
May 12, 2009 12:54:47 am

Agency to buy 333 flats against recommendations of own panel,to release payment in installments against ready flats

After some dilly-dallying,the Delhi Development Authority (DDA) on Monday announced that it would buy 333 flats in the Commonwealth Games Village from the cash-strapped developers,Emaar-MGF.

“The recommendations of the committee (set up by DDA to fix prices for the Village flats) were considered and finally it has been decided to purchase approximately 333 flats at the rate of Rs 11,000 per sq ft,” DDA’s public relations director Neemo Dhar said in a statement.

Dhar said the rates are “much below the rate being charged by Emaar-MGF from open-market buyers.” She added that the current market value of these flats,being built on the Yamuna riverbed in East Delhi,is Rs 12,400 to Rs 14,400. “The amount towards the cost of these flats will be released in installments and has been linked to various stages of completion of flats,” Dhar said.

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Sources confirmed that DDA’s decision to buy the flats came from the Lieutenant Governor’s office. “The committee to fix the rates recommended a basic price and left room for negotiating that price,” a DDA official closely involved with the negotiations told Newsline. “We arrived at the price of Rs 11,000 per sq ft after discussions with all parties involved.”

The four-member committee was set up in March 2009 to decide the price at which DDA should buy these apartments,keeping in mind the slowdown in the real estate sector. The committee comprised DDA financial advisor Pawan Kumar,HUDCO executive director R K Safaya,CPWD superintendent engineer Shailendra Sharma,and NBCC real estate division general manager H K Dhawan.

Don’t buy,committee had advised
The committee,in its report submitted to the Lieutenant Governor and the Ministry of Urban Development,had recommended a “purchase price in the range of Rs 9,382 to Rs 9,720 per sq ft”. The panel,though,left it on DDA “to finalise or negotiate the final price”.

Advising DDA against buying the flats,the committee had recommended that the public authority instead extend a loan of Rs 500 crore to Emaar-MGF at an interest rate of 12-13 per cent. The committee had indicated that the agency might find it difficult to sell these flats at a rate higher than the rate of purchase due to the ongoing slowdown.

The committee’s report had also highlighted that Emaar may “use the payment to repay existing debt and not for onsite development work”.

But a DDA official,who did not want to be named,said extending a loan was not a viable option. “First,Emaar is no position to produce a bank guarantee,and we cannot give a loan without it,” the source said. “Besides,it was decided that a loan cannot be extended against flats that are yet to be constructed. So we decided that the safest option would be to purchase these flats and link the payment to completion of the project.”

Accordingly,DDA will only release payment to Emaar-MGF in installments against flats already constructed. The official said the deal has already been inked and funds are being released to ensure there is no delay in construction.

According to the committee’s report (Newsline has a copy),the realty major has already spent Rs 788 crore on the Commonwealth Games Village; it now needs an additional Rs 502 crore to wrap up the project.

A FLAT RACE TO FINISH INITIAL AGREEMENT
Number of flats: 1,168
Emaar’s share: 779
DDA’s share: 389

AFTER MONDAY’S DECISION
Number of flats: 1,168
Emaar’s share: 446 (initial 779-333)
DDA’s share: 722 (initial 389+333)

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