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Corporate Nov 26, 2013

Sahara turns whistleblower, says Indian realty is all but illegal

By Rajesh Pandathil

In its desperate bid to contest Sebi's contentions in the Supreme Court, Sahara India Parivar has inadvertently said something which other business houses would not have the guts to say.

In an advertisement published in newspapers today Sahara has said that "throughout the country development of Residential, Commercial, IT establishments etc. are allowed and Townships are developed in 'No Development Zones'".

In other words, the real estate sector in India is built on illegalities. Now, this is almost an open secret. And the Aam Admi - not just the Party, most of the true blue aam admis too - knows this well enough. But, when the revelation comes from a business conglomerate it is heartening to hear. It is a candid confession, to say the least.

Sahara's advertisement comes in response to Sebi's recent submission in the Supreme Court that the documents submitted by the group as collateral for the amount to be refunded to investors have overvalued the properties.

In August 2012, the group was ordered to refund about Rs 20,000 crore (including interest) two of its firms had raised from investors through illegal optionally fully convertible debentures. The Supreme Court later gave further extensions, but the group is yet to conform to the order. The capital market regulator Sebi is overseeing the refund.

The group, however, claims that it has done most of the refunds and only about Rs 5000 crore is left.

The court last month ordered the group to submit documents of properties worth Rs 20,000 crore with Sebi as collateral for the refund amount. In keeping with this order, Sahara gave Sebi documents of two plots of land.

One is a 106-acre land in Versova, a western suburb in Mumbai, which it claimed is worth around Rs 19,000 crore. The second one is a 200-acre land in Vasai, again a distant Mumbai suburb, which it estimates to be worth about Rs 1,000 crore.

It was this valuation that Sebi challenged in the court. Sebi counsel Arvind Datar said Sahara has valued the Versova property by using discounted valuation method (BS report). Under this, if a township is built on this plot by 2021, it would be worth Rs 19,000 crore. This value has been discounted to the present value.

Datar also said that the Versova land parcel is surrounded two creeks and so, it is in Green Zone. In other words, it is a no development zone, where no commercial activity is possible (Mint report).

Contesting these arguments by Sebi, Sahara has alleged that the capital market regulator has placed irrelevant facts before the court. "SEBI has tried to convince that everyone that in a 'No Development Zone', nothing at all can be developed," it says. But it is not so, it says. Then comes the damning revelation about the Indian real estate sector - that most of the real estate developments in India happen in such zones.

Sahara has levelled other allegations too, like Sebi did the same with a property document that Sahara had submitted to it in March 2012; and that Sebi has not yet refunded to investors the Rs 5,120 crore Sahara had given it last year. Reuters

Sahara has levelled other allegations too, like Sebi did the same with a property document that Sahara had submitted to it in March 2012; and that Sebi has not yet refunded to investors the Rs 5,120 crore Sahara had given it last year. Reuters

Sahara has levelled other allegations too, like Sebi did the same with a property document that Sahara had submitted to it in March 2012; and that Sebi has not yet refunded to investors the Rs 5,120 crore Sahara had given it last year. It is even pained at the plight of its "esteemed investors" who have been at the receiving end of its long winding legal battle with Sebi. So, after one year of dilly-dallying with the Supreme Court's refund order, it has now decided to save time by submitting new title deeds with Sebi.

But all these are irrelevant. In fact, all of Sahara's misdeeds and deeds become worthless in front of this damning revelation that tweaking of no development zones is rampant in India.

The Aam Admi (again, not only the Party) had always had this nagging suspicion that the real estate scams unearthed over the last many years are only the tip of the ice berg. Sahara has just confirmed it.

Ha! Whistleblower Sahara!!

by Rajesh Pandathil

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