Rs 4.5 lakh crore infrastructure projects stuck in Mumbai region after SC order on solid waste management

By: | Published: September 4, 2018 2:33 AM

The ban, imposed on a couple of other states including Madhya Pradesh and Uttarakhand, threatens to jeopardise more than Rs 4.5 lakh crore worth of projects, analysts estimated.

Rs 4.5 lakh crore infrastructure projects stuck in Mumbai region after SC order on solid waste management

Close to Rs 2 lakh crore worth of infrastructure projects could come to a standstill in the Mumbai region alone after a ban imposed by the Supreme Court on all construction activity due to what it said was the absence of a solid waste management policy in the state.

The ban, imposed on a couple of other states including Madhya Pradesh and Uttarakhand, threatens to jeopardise more than Rs 4.5 lakh crore worth of projects, analysts estimated.

Analysts observed that cash collections for real estate projects are linked to construction activity, and accordingly a prolonged blanket ban on construction activity will impact players such as Oberoi, Sunteck and Godrej Properties. However, where commencement certificates for most projects have been procured, the impact would be smaller if the ban were to be restricted to new projects only.

“We do highlight though, that our interaction with various players in the industry as well as the response from the government suggests that the policy for solid waste management is already in place in Maharashtra, even though the same had not been submitted to the concerned authorities. In our view, the government, that has large infrastructure projects at stake will likely formalise the solid waste management policy and be able to vacate the ban on the construction activity at the earliest. An unwanted outcome would be a prolonged ban, the likelihood of which we see as low,” analysts at Kotak Institutional Equities said.

Hiranandani Group managing director Niranjan Hiranandani said if the ban remains in effect for the month until the next hearing scheduled for October 9, about four lakh people in and around the Mumbai region alone would be impacted. “Not only will they not get paid for the month of October, it will take some time to mobilise these resources again, which can result in more delays,” he said.

According to officials, the Maharashtra government may approach the SC ahead of the hearing on October 9 to get the ban on construction lifted.

Nitin Kareer, the state’s principal secretary, urban development department (UDD), told FE: “We have clarified that the ban applies to states which do not have a waste management policy. Maharashtra already has a policy and we are informing the court of the same and that we are implementing it.”

In an emailed statement, the chief minister’s office said while the state has made its policies regarding solid waste disposal, the information was not submitted to the apex court “due to some technical problems”. The state government is going to bring it to the notice of the SC and a request will be made to permit the construction of housing complexes in the state, the statement added.

Meanwhile, roads construction companies are also in a bind. While the ban clearly applies to all construction activity in the real estate sector, a number of road developers, too, have written to the National Highways Authority of India (NHAI), seeking clarity on whether the ban also applies to the construction of roads and highways.

In an order on March 15, 2018, the SC had allowed real estate development in Mumbai provided developers followed certain specified guidelines and submitted bank guarantees between `5-10 lakh depending on the size of the project.

Marathon Group managing director Mayur Shah said the apex court’s order would not impact the existing construction activity as it was already in compliance with the conditions stipulated in the earlier order.

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