More than 1,000 families have approached the commerce ministry, seeking action against what they call fraud committed in the “sale” of flats to them by entities allegedly belonging to real estate developer Niranjan Hiranandani in a special economic zone (SEZ) in Panvel in Navi Mumbai.
More than 1,000 families have approached the commerce ministry, seeking action against what they call fraud committed in the “sale” of flats to them by entities allegedly belonging to real estate developer Niranjan Hiranandani in a special economic zone (SEZ) in Panvel in Navi Mumbai. A spokesperson for Hiranandani group denied allegations of any wrongdoing.
In a letter to commerce minister Nirmala Sitharaman, these people have said that Sunny Vista Realtors started selling them flats in the non-processing area of the SEZ, named Hiranandani Palace Garden, in 2009 and most of them paid as much as 95% of the contracted value of flats by December 2011. Some of the allottees that FE spoke to say the housing project could be worth at least R1,670 crore (it involves 1,670-odd flats, with an average value of around R1 crore each).
“This fraud was perpetrated deliberately by hiding that flats in SEZ can never be sold, and only those who applied for registering the property came to know at too late a stage that the builder, despite charging a premium…, was in fact selling us a flat where he was denying us our rights of being called flat owners under the pretext of flats being subject to SEZ rules,” they alleged in the letter.
The Hiranandani group spokesperson clarified that Sunny Vista is an entity of Hirco Plc in which Niranjan Hiranandani was the chairman (until December 2010), while Persipina Developers Pvt Ltd — the current developer of the project — is 50% owned by Hiranandani indirectly.
While these people stressed Sunny Vista “sold” them flats in the SEZ, the Hiranandani spokesperson insisted flats were given only on “lease”.
“Sunny Vista has not sold any flat to any person. It has only agreements to lease under applicable rules of the SEZ Act 2005 and SEZ Rules 2006,” the spokesperson told FE in an email.
According to SEZ rules, any residential building in the non-processing areas can be used only by people working in that SEZ. Should a developer wish to sell flats built in the non-processing areas, he can do so only if he gets the relevant portion de-notified by the designated authorities from the rest of the SEZ, and that too after paying for all the incentives (like duty-free imported machinery and raw materials) he has received to develop that part of the SEZ. Also, non-processing areas must not account for more than 50% of the total areas of an SEZ.
The allottees countered the claim of “lease”. “The builder may have used certain words in the agreement to make it look like a lease but it’s clearly a sale. The allotment letters given to us say it’s a sale of flats. The Maharashtra government has registered it as an agreement of sale, and not lease, and Sunny Vista was a signatory to it. Also, we were charged the stamp duty by the state government in accordance with the rate applicable to sale, and not lease,” one of them said. They said it was Sunny Vista which collected the stamp duty (at the rate applicable to sale) and deposited it on behalf of the “buyers” with the state government.
They produced copies of some of the letters purportedly sent by Sunny Vista, in which it had said: “The provisional allotment letter is issued to you to initiate the process of confirming the sale of this apartment in your name.” FE couldn’t independently verify claims of either the builder or the flat “buyers” with the Maharashtra government immediately.
Asked if the builder can specify the SEZ rule that suggests flats in the non-processing areas can even be “leased” to people who are not a part of that SEZ, the Hiranandani group spokesperson replied: “There is no rule saying that flats cannot be leased to anyone as long as the person is in compliance with the SEZ Act 2005 and SEZ Rules 2006. This has been confirmed to every customer in their individual contract.”
In the letter to Sitharaman, the allottees have alleged that the registered agreement of “sale” between the company and them says they only have the “right to beneficial use for 99 years” instead of an outright “sale”.
Compounding their woes, Sunny Vista declared in 2012 that it was unable to clear loans taken from a consortium of banks, led by Punjab National Bank. The banks seized the project in 2013 under the SARFAESI Act and refused to recognise the rights of the “buyers” who had already paid almost the entire value of the flats. The flat “buyers” approached the Debt Recovery Tribunal, which ordered that their rights would be protected and flats would have to be completed by whoever takes over the project through the banks’ open e-auction, according to the letter.
Interestingly, Persipina Developers later took over the project through e-auction.
The flat “buyers” also sought to draw attention to a meeting of the Board of Approval for the SEZs on May 19 last year, asking for the de-notification of 10,77,419 sq ft of the non-processing area where 1,012 residential units have been built from the rest of the SEZ. This de-notification was subject to the payment of duty benefits availed after obtaining a no-objection certificate from the state government, according to the minutes of that meeting.
However, the Hiranandani group spokesperson clarified: “Sunny Vista had made an application for dual use (of residential building), which was rejected because their land had been sold off by the banks under the SARFAESI Act. Persipina had bought the assets and taken it over and had applied separately for the takeover. Persipina has not been asked to de-notify anything in the official communication given to Persipina by the ministry of commerce and industry.”
– Allottees say they were ‘sold’ flats in SEZ and they also paid stamp duty rate applicable to sale
– Rules don’t permit sale of flats in SEZ without getting relevant portion de-notified
– Hiranandani spokesperson says flats were not sold but given on ‘lease’ only