Builders resort to distress sales

Downcast builders have been unloading properties at heavy discounts, accepting down payments of as little as Rs 51,000 to Rs 75,000 per flat. Others, far more desperate, have been left clutching IOUs after signing agreements based on promissory notes dished out by smirking clients. However, every IOU accepted further diminishes the prospect of hard cash returns.

Every blow of the bulldozer flattens prices further, and at Rs 350 per sq ft (against the earlier Rs 700 to Rs 800), almost every deal cracked in the township is a virtual steal!

Also, private financiers, demanding interest at ratesranging between 5 and 15 per cent, have spied the perfect opportunity to tighten the squeeze on small builders, who are resorting to distress sales at breakeven prices to repay the loan sharks. However, not even a quarter of the loans thus sought have been repaid.

Says Hemant Shah of Siddhivinayak Builders, “Since many small builders were once estate agents, large instalments to financiers force them to sell flats at breakeven prices much against their wishes.”

Loan sharks have pumped in as much as Rs 150 crore in real estate here over the last 5 to 10 years, before the boom went bust. Now, they figure, it is payback time, scaring small builders out of their wits.

The summer vacation is usually peak time as most people shift house during this season. However, this year’s scorcher has only burnt holes in the pockets of builders, who are now prepared to settle for measly lease deals. Earnings on these is a measly Rs 1,000-2,000 per deal, reveals Bhavin Singh, an estate agent.

He says a paltry 100flats have been sold this season compared to the usual 300-400 which are snapped up by either investors or property buyers.

The Mira-Bhayander Municipal Council’s (MBMC) demolition drive launched on May 4 is also tormenting builders with about 700 constructions deemed as illegal. Influential developers, though, have managed to connive with civic officials to spare their structures but the small players are cringing at the MBMC’s current target of 146 buildings.

Many builders are extremely anxious to sell these flats, given the authorities’ reluctance to raze those which are occupied, legal or illegal. “Once a building is occupied, the council thinks twice before demolishing it. An illegal building thus gets `legalised’,” Singh points out.

In sheer desperation, some builders literally stuff friends and relatives into unoccupied flats before the demolition squad reaches the condemned structures to give the impression of occupancy.

Blaming the MBMC for allowing illegal construction activity, JitubhaiChandranana, president of the Mira-Bhayander Builders’ Association, says builders are selling about 30-35 per cent of their flats at rates which could save them high monetary penalties.

The underworld is also cashing in on the builders’ misery, upping demands for `protection’ money which ranges between Rs 50,000 and Rs 10 lakh depending on the builder’s financial well-being.

Last Thursday’s encounter in which gangster Subhash Thakur aide was gunned down during a `collection call’, was a stunning wake-up call to `defaulting’ builders, who are now approaching the police for help. Though still reluctant to lodge complaints, many have contacted senior police officials here as well as in Thane, reporting threats from the local mafia. Inspector P B Niphade of the Bhayander police station told Express Newsline that builders have been advised to be more vigilant and report threats.

The pleas for help, he admits, have increased since last week’s encounter.

However, there is a note of caution for clientseager to prey on builders’ predicament.

With developers turning desperados, there is every chance of clients being cheated. So, read the fine print very carefully, advises Sadanand Jadhav, an estate agent.

He says customers, drooling over throwaway prices, have been closing deals within minutes. “But this is a dangerous phenomenon,” he warns.

K V Satyamurthy, president of the Federation of Accommodation Industry, agrees.

He says there is no sanctity for any agreement of sales in the township.

"In the absence of any regulatory body, builders are having a good time doing what they feel is right.”