Mr. Navin Raheja is supposedly one of the most powerful men in Indian Real Estate today. As the President of NAREDCO (National Real Estate Development Council), he has an oversize influence on the future of Real Estate Policy of our country. And, as some recent advertisements by his company claimed, he also heads one of the largest real estate development companies in India – http://www.rahejabuilders.com/. But could all this be a part of a yet-to-unleash scam. Here is the explosive story behind “The Man Who Would Be King – Navin Raheja”.
What is the truth behind the success and riches of Navin Raheja and how does it all started happening.
This is the story of Mr Navin Raheja’s rise to power. It is, or will be, followed by almost every other real estate builder as they collectively dominate a sector that contributes, by some estimates, over 7% of our GDP and, indirectly have an influence on much more than that. This is the story of the network of investors, politicians, bureaucrats, brokers, and film stars that has come together in a nexus with the developers to change the future course of our society – for good or bad is the question. And in terms of influencing the culture of our society, their influence is much larger, esp in metro areas such as Gurgaon, which is where this story begins.
The slut bit me! – Sean Connery in The Man Who Would Be King
PATH TO INDIA’s MOST AWARDED COMPANY
Mirror Mirror on the Wall, Am I the Most Awarded Builder of Them All – with Apologies to Snow White & The Seven Dwarfs
The Army Day Advertisement from Raheja screams “India’s Most Awarded company with over 50 National & International Awards for Architectural Innovation & Quality,” which are exhaustively detailed on the company website http://www.rahejabuilders.com/company-awards.asp One of the projects which has won numerous awards including CNBC AWAAZ real estate award, Zee Business-RICS Real Estate Award, CNBC-AWAAZ-CRISIL Real Estate Award, and even the Best Garden in the City Award from HUDA (Haryana Urban Development Authority) is the flagship residential project called “Raheja Atlantis” in Sector 31, Gurgaon.
The story of “Raheja Atlantis” is a microcosm which illuminates the path taken by the company on its way to glory & super-success. The story of Atlantis is a harbinger of things to come in many ongoing projects of the company including Atharva, Navodaya, Vedaanta, and Revaanta. Mr Navin Raheja & Raheja Developers exert immense influence on the residents of Atlantis to this day, years after the project was ostensibly completed.
PATH OF SUCCESS
The Road to Hell is paved with good intentions – Ancient proverb.
Every day the residents of Raheja Atlantis access their apartments passing not through common areas that are jointly owned by them, but passing every day through lobbies that are owned by Mr Navin Raheja & Raheja Developers. This is an highly unusual arrangement, and the residents are not very happy about it; understandably so. How Mr Raheja is able to hold on to the lobbies, and many more of the common areas in Atlanis, is the key to understanding the riches that Raheja Developers has been able to accumulate.
UNCOMMON COMMON AREAS
A guest is like rain: when he lingers on, he becomes a nuisance – Yiddish Proverb
During out discussion with various residents of Atlantis we found out that Mr Raheja has not only retained control over the lobbies, but also the swimming pool, the commercial shopping complex, the club, common spaces on Ground Floor of Towers A & B, extra parking slots in the basement … The residents are expected to pay to access these areas, to which they are vehemently objecting – with good reason.
The reasoning is that after the Atlantis complex was “fully developed” the builder realized that he had constructed about 17,000 sq.ft of extra “super area.” Instead of conveying it proportionately to the residents, in an highly mysterious manner Mr Navin Raheja decided to retain this extra “super area” for himself. And in an audacious exercise of cherry-picking, the builder decided that the extra “super area” would comprise of the swimming pool, the commercial shopping complex, the club, … etc. All these are income generating areas which are supposed to be there for the residents so that their maintenance can be subsidized, but are now raking in the riches for Mr Raheja and Raheja Developers and will do so for perpetuity.
The only problem with him retaining the “excess super area” is that is not only contrary to the spirit of the housing laws of Haryana, but probably also illegal. A recent order by the Competition Commission of India in the case of DLF Belaire http://cci.gov.in/May2011/OrderOfCommission/192010S.pdf unambigiously states in Section 7 (viii) on Page 7 that “Common areas of the plot of land on which the Group Housing Colony is developed, in fact, belong to and are meant for the common use of apartment owners and once the apartments are sold, all the common areas and facilities vest jointly in the apartment owners and are to be maintained by apartment owners by forming an association in terms of the laws laid down by Haryana Govt.”
In addition, the residents say that Mr Navin Raheja recently got permission to make a nursery school on their land which after their opposition was cancelled. And now, the residents say, Rahejas claim to have gotten permission to build and sell another tower in the complex which is again being resisted by the residents. Mr Raheja is like an unwelcome guest in Atlantis that just does not want to leave.
TIME IS MONEY, SO DELAY LEADS TO RICHES
There is one kind of robber whom the law does not strike at, and who steals what is most precious to men: time – Napoleon Bonaparte
Mr Raheja also charted his path to riches & success by leveraging the maxim that “time is money.” There were all kinds of delay in the completion and handing over of the Atlantis project, and in addition to a small fortune that he must have collected from the “interest” levied at rate of 18% and 24% pa for buyers making late payments, there was money to play around with due to the absence of an escrow account devoted to Atlantis.
Even the supposedly construction-linked payment plan is actually a time-linked plan initially where the builder takes about 35% of the payment with zero work on the ground, then a front-loaded construction linked plan wherein the builder collects 95% of the money while only 40% of the work is done generally of creating the skeleton structure. And after collecting 95% of the money the builders start delaying the interiors as the incentive of getting installments from the buyers is now no longer there. Time is money, and while the money sits in the builders account, he can collect interest or better still deploy the money elsewhere and make more money. Even if the buyers find out about this, they can do very little other than write letters of anguish or mild threats to the builders which are treated with the contempt they supposedly deserve.
This is in stark violation of the terms and conditions of the license LC IV A of Haryana http://tcpharyana.gov.in/CIM/HaryanaDevelopmentAndRegu.htm, stipulated in the act vide its section 1(j), “That the owner shall deposit 30% of the amount realized by him from flat holders from time to time within ten days of its realization in separate accounts to be maintained in the Scheduled bank and that this amount shall only be utilized by the owner towards meeting the cost of internal development works and the construction works in the colony”
INSANE PRICE INCREASES
Zimbabwe’s peak month of inflation is estimated at 6.5 sextillion (6,500,000,000,000,000,000,000) percent in mid-November 2008 – Steve H Hanke, et al.
Raheja Developers has increased prices of their properties by 250-300% in less than 5 years, and their consequent profit by many hundreds of percent. Atlantis which was launched at Rs 2150 psf in 2005 today is listed by the company at Rs 14,975. Atharva which was launched in 2007 at Rs 2750 psf is today listed by the company at Rs 8,675, Navodaya launched at Rs 2,275 is today 4,575, while Vedaanta launched at Rs 2375 psf is today listed at Rs 6,675 psf.
What caused them to raise the prices so dramatically? Was it increase in cost of raw materials, or increase in cost of labour? It could not have be the cost of land as it was already priced in at the beginning of the project.
And herein is the question of whether the builders are driving the prices northward by artificially pumping up the prices and restricting supply, or are they just riding the wave of the booming property market. And what ever it is, it is very lucrative and alluring. “The forever-appreciating real estate prices and the certainty of creating money out of thin air is attracting politicians to this business,” an industry source said. “It seems like a no-risk business, except for the delay in getting licences in some cases.” http://bsl.business-standard.com/india/news/realtysafe-bet-for-politicians-to-park-black-money/500670/
As an interesting aside, as part of the terms and conditions of the licence the builders are not supposed to make these insane profits, but is limited to a maximum of 15%. In the LC IV A – section (o) sub-section c which the licence holder signs, it says that “the owner while determining the sale price of the flats in open market shall compute the net profit @ 15% and the details of which including the cost of acquisition of land shall be supplied to the Director as and when demanded by him. The total project shall mean a defined phase or a compact area of the colony, as approved by the Director.”
Any violation of ANY of the terms and conditions of the LC IVA agreement may lead to cancellation of the license under section 2, but all builders in Gurgaon, including Mr Raheja, have come to realize that the housing laws are not only blind but also toothless. The laws live only in the books and there is no govt or private agency to implement them.
MODERN DAY ROBBER BARONS in El Dorado, Gurgaon
You people should consider yourselves lucky that I’m granting you an audience tomorrow instead of 20 years from now – Wizard of Oz
A broken system with almost no checks & balances allows obscene wealth creation in the real estate sector, and if this sector is given the “industry status” that bodies like NAREDCO & CREDAI are clamoring for, the process of selective wealth creation will be further accelerated. There are sufficient laws on the books, but there is a failure to implement the laws. And there is almost no fear of punishment to the transgressors.
