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Unitech takeover by govt unlikely to set any precedent: Sandeep Parekh

Unitech is only one of the hundreds of developers which are stressed today and so I do not think it is possible for any government to rescue the top 100 developers in the country. There is no practical possibility of the government taking over the top 3-4 companies and bailing them out. So it is unlikely to set any precedent.

ET Now|
Last Updated: Jan 20, 2020, 05.47 PM IST
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Sandeep Parekh, Finsec Law-1200
There is no God given right of homebuyers to be rescued by the government. Unitech is only one of the hundreds of developers which are stressed today and I do not think it is possible for any government to rescue the top 100 developers in the country, says Sandeep Parekh, Managing Partner, Finsec Law Advisors. Excerpts from an interview with ETNOW.


In a major development, the centre has told the Supreme Court that it is okay to revisit the 2017 proposal to take over the management control of the embattled realty firm, Unitech. They have said they are going to complete the stalled projects to bring relief to around 12,000 hassled home buyers. What is your first reaction to this news?
It is a good move to take over the board of the company. Whether the financial support is coming from the the new fund which the government has created or some other sources has to be seen. That is the critical part. Till that part of the puzzle gets solved, this is a good move but not sufficient move.

How exactly do you mean?
Frankly necessary but not sufficient. They first needed to change the board but they need money to complete the projects So till the time that is arranged, the projects are not going to take off.

This can be tackled because realty is a cash trapped sector and the government is now coming in, saying they are going to appoint the new board. It sounds like the centre is taking control but without adequate funds, what are the options that are available to the government?
There are only two options available. One is for the government to guarantee payment of whatever debt they raised from private sector or to fund it themselves. Both the options may not turn out to be bad deals, If the funds are given and the projects are completed, it is highly likely that the government may make profit out of the projects. This concerns flats in premium locations and the customers are there. They probably have made part payment as well and between customer funding and private sector funding, so long as this government gives implicit or explicit guarantee, it should work out.

You know this is a third company in recent times to be taken over by the government. It began with Satyam 10 years ago; then came IL&FS and now Unitech. The same government nearly two years ago tried to take over Unitech, but it did not happen. The homebuyers suffered. Who is answerable to the home buyers?
There is no God given right of homebuyers to be rescued by the government. So let us not start by blaming them. At the same time the realty sector is busy with its own problems. The developers have not really reduced prices to kick start demand. That is the biggest cause of concern. Unitech is only one of the hundreds of developers which are stressed today so I do not think it is possible for any government to rescue the top 100 developers in the country.

The National Capital Region is a hotbed of delayed projects and very bad builders. You have got Unitech, Amrapali, Supertech, Jaypee. How will the Unitech case create a precedent for all the other thousands and lakhs of buyers who are stuck today?
No, I do not think this will be a precedent at all. I do not think it is practical to even expect that. We are looking at very large numbers, even if you look at the top three or four, forget the top 100. So I do not think there is any practical possibility of taking over the top three or four companies and bailing them out.

For whatever reasons this is probably the biggest in terms of the number of consumers and flat purchasers and maybe they have looked at the commercials in terms of the external lending plus funding by the flat owners may just turn it around. I do not really know but I really doubt that this will be a precedent for even the top three or four such companies.

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