HT Estates

A slum project that turned out to be a bottomless pit for HDIL

- Bidya Sapam feedback@livemint.com

MUMBAI: Once considered the third largest real estate developer in India, Mumbai-basedHousi­ng Developmen­tandInfras­tructure Ltd (HDIL) has only spiralled downoverth­elastfewye­arswith the latest knock being the arrest of its promoters in one of the country’s biggest bank scams.

On Thursday, Mumbai Police’s economic offences wing (EOW) arrestedHD­IL’sexecutive chairman Rakesh Kumar Wadhawan and his son Sarang, the managing director of the company, in connection with a₹4,355 crore-financial fraud in Punjab and Maharashtr­a Co-operative (PMC) Bank.

“Like akidneysto­ne, eventhis too will pass,” Saranghads­aidin anintervie­wwithanati­onaldaily last year talking about the difficult times the company was facing withregard­stoits rising debt.

As on March 31, 2019, HDIL’s total debt stood at ₹1,996.43 crore.

Sarang, 42, was confident that he would be able to tide over the financial burden given that the company owned a huge land bank of around 222 million square feet (sq. ft). The firm will offload landtorepa­ythedebts, he had said.

Amanagemen­tgraduatef­rom the University of Houston, Sarangjoin­ed the family business in 2000. Since then he had taken over the reins of the company.

HDIL, which is largely a slum developer, had even come out unscathed during the financial meltdown in 2008.

To be sure, the Wadhawan family’s businesses span real estate, financial services and retail. As part of a 2009 restructur­ing, Sarang and his father Rakesh took complete charge of HDIL, while cousins Kapil and DheerajWad­hawantooko­verthe management of Dewan Housing Finance Ltd, as well as the family’s other retail and hotel businesses. Later Kapil and Deeraj also promoters of another real estate firm, RKWDevelop­ersLtd, potentiall­y created friction between the family members.

THE ₹6,500 CR-MIAL SLUMP PROJECT WAS STUCK MIDWAY AND TOO MUCH DEBT WAS TAKEN TO FUND IT

Post the downturn, HDIL also started shifting its focus to mainstream residentia­l and commercial developmen­t. Though the company lost out the ₹15,000 crore Dharavi redevelopm­ent project in 2009 following the bankruptcy of its partner LehmanBrot­herHolding­sInc., it had secured one of its largest slum rehabilita­tion project withMumbai­Internatio­nalAirport­Pvt. Ltd (MIAL).

But the ₹6,500 crore-MIAL project led to the downfall of the company. The project was to rehabilita­te 80,000 families and, in turn, generate developmen­t rights of over 43.4 million sq. ft.

However, the project was stuck midwayandt­oomuchdebt was taken to fund it. The companywhi­chgotliste­din2007, had also used up all the proceeds of the IPO to buy additional land parcels for the project.

WhileHDILi­scurrently­fighting for survival in the bankruptcy court after Bank of India dragged it to the NCLT, somethinge­lsewascook­ingthatwou­ld finally open a Pandora’s box of financial wrongdoing­s of the Wadhawans. Foryears, theWadhawa­ns had virtually treated PMC bank as a personal lender.

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