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Budwel Auction. HUDA has sold Assigned Land. UNITECH almost duped of Rs.160 Crore. 160 Acre Hotel Corridor Project goes for a toss.
An analysis of rampant plot sale activity by HUDA and other Departments, trapping unwary Developers into buying illegal lands .........Exclusive Ventures -Aug 2008
The rising expenditure due to subsidies and other populist policies, coupled with diversion of funds by contractors, politicians and others puts State Govts in financial mess. The negative trend in Real Estate transactions have added to Govt's woes, with revenue collection by way of registration charges and stamp duty, falling drastically.
Increasing Registration Charges and Approval fees have only been counter productive with fewer projects being planned by developers.
The easiest way out of financial mess seem to be to sell off land and use the cash for expenditure! In their eagerness to meet strict Govt. target for revenue, set for various departments, HUDA, APIIC, APHB have been auctioning off land with doubtful legal lineage.
The history of much hyped Golden Mile Auction (Kokapet -Hyderabad) is all too well known with buyers left with nothing. Neither land nor money they paid.
Once money goes into starving Govt treasuries, its almost impossible to get it back. Unfortunately, bidders were pushed into paying large advances even before possession.
Bids were called by HUDA in January 2008 for 164 Acres at base rate of Rs.4 Crore per Acre while market rate for small pieces of GOOD LAND was only Rs.2 Crores per Acre in that area.
Hyderabad based Companies including IVRCL, GVK, GMR, LANCO, Maytas and others, stayed away. But the upcountry Real Estate Majors DLF, UNITECH and ANSAL Group placed bids. Unitech offered Rs.4.02 Crore per Acre and bagged 160 Acres of illegal land!
The Terms of payment required successful bidder to pay 25% (Rs.160 Crore), even before Letter of AWARD! In the bid terms no commitment was given that the land is freehold and is free of any litigation. However, UNITECH thought it fit to handover 160 Crore to HUDA!
4.0 Status. 160 Acre Hotel Corridor Project goes for a toss.
Since the land was NOT FREE HOLD and actually "Assigned Land" (land Assigned by Govt to the poorest of the society for agriculture) being enjoyed by peasants over 50 years, they rightly went to Court which rejected Govt right to sell land for private purposes.(View News Report)
In this regard, recently the CM himself was forced to surrender Assigned Land to avoid controversies. The stated policy of the Govt. is that Assigned land shall not be sold by Assignees and if sold Govt. will take over and either return it to Assignees or could use it for public purposes like, building Govt schools, Govt hospitals etc.
5.0 While this being the policy of the Govt, how could HUDA have sold Assigned Land to Unitech?
Obviously due to pressure from Govt with regard to revenue target. By hook or crook money had to be made! Investing Companies now look upon HUDA with suspicion. The biggest dis-service done by the Govt. is creating Credibility Loss for HUDA, by pushing it to sell land, in as-is-where is condition, without clearing litigations and before ground development.
6.0 Why did Unitech and others bid for Assigned land which has no commercial value? Why did Unitech Agree to pay 25% (160 Crore) upfront, with no surety on possession or ownership of land? Answer is simple and easy.
Large Developers have all raised Crores from public by way of IPOs. Its easy Money with lakhs of small investors contributing their life's savings, hoping to get rich.
The Companies have got riches, by tapping the market and they have nothing to lose in bidding and handing over Crores to Agencies like HUDA for worthless land. Its not their money after all and they find no need to do a proper Title Survey or Legal Verifications!
If the Money was hard earned, these companies will never take risks like these.
7.0 UNITECH may not learn from the mistake
HUDA has offered to give 40 Acres said to be non Assigned Land to UNITECH, to settle the Rs.160 Crore paid! Its most unlikely that the 40 Acres is a single bit. It could be scattered over 160 Acres! There is every chance that the land offered could have legal issues or could be under FTL which again makes the land worthless, commercially.
Even otherwise, the location of Budwel is land-locked with no good, direct access to city at all. A 40 acre project in Budwel, will be a commercial disaster for any Investor. But however, if Unitech can pay Rs. 160 Crore advance with nothing in hand and no legal protection, it could be expected to throw the money away, by grabbing the GREAT OFFER by HUDA!
8.0 Wrap-up - Auction of Land -Hyderabad
Developers have to appreciate the fact that during the last 2 to 3 years, HUDA, APIIC, APHB etc have been putting up land for auction, before its 100% legally cleared. The lands lack clear Title but buyers are asked to pay, sometims 100% UPFRONT!! Developers do not seem to be carrying out serious due diligence exercise before committing crores to the Agencies of AP Govt.
Individual buyers beware! Planning to buy in any new layout from HUDA? If it can cheat powerful corporate entities of hundreds of crores, its no great task for it to cheat individual buyers and dump assigned land or shikham land, on their head. Unlike earlier, when people used to blindly believe HUDA, it would now be necessary to do detailed legal verification, before buying any new auctioned plot, from HUDA.