National Building Construction Corporation (NBCC) is the only hope for more than one lakh harassed homebuyers in Delhi and its neighbouring areas waiting for their homes promised years ago.
The Supreme Court has already tasked the government-run construction firm with the completion of 16 housing projects of Amrapali group. It has sought suggestions from 74 Unitech project buyers for doing the same and there is a good chance that NBCC might be called in to bail out Jaypee Infratech customers as well.
The projects are stuck because the developers diverted funds meant for constructing homes to acquire new land parcels and, at times, to enrich themselves, as the court judgment in Amrapali case shows. Tightening of credit to the real-estate sector following the NBFC crisis has only added to the delays.
The court’s move gives relief to homebuyers because NBCC comes with a sense of sovereign guarantee. But, NBCC, which doesn’t do the construction but sub-contracts the job, has its work cut out. It is looking at finishing around one lakh housing units, which are at different stages of construction.
According to property consultant ANAROCK, the combined built-up area of all Amrapali, Unitech and Jaypee projects is 93.75 million square feet, valued at approximately Rs 43,650 crore.
So, NBCC is rescuing a small neighbourhood, but a town, so to speak.
Is NBCC up to it?
NBCC does not seem to be taking any market risks. It is not bringing any seed capital to start work. It will charge 8 percent of the total cost of a project as its management consultant fee. This means that anybody can be brought in to do the job of managing an incomplete project, said experts.
During the Unitech hearing on July 29, one of the counsels for homebuyers, Gopal Sankaranarayanan, wondered if NBCC could take on more work, as it already had Amrapali on its plate and possibly Jaypee as well.
Attorney General KK Venugopal said Larsen & Toubro had offered to undertake the job but had later withdrawn.
Sankaranarayanan also questioned NBCC’s competence to build high-end flats, saying it had no experience of premium projects.
For Amrapali, NBCC has to complete around 40,000 units, Unitech has around 65,000 and if Jaypee also comes its way, add another 24,000 houses.
Some experts share Sankaranarayanan’s concerns. “The scale is daunting, they also do not have the mindset to handle over 1.3 lakh buyers’ apathy or for that matter the legal issues confronting it. Handling all of this will be a challenge,” said an expert on condition of anonymity.
The magnitude of work was significant, said Abhilesh Babel, CEO at Feedback Infra (P) Limited. NBCC would have to ramp up its management capabilities and may have to deploy significant manpower, he said.
“These are semi-finished projects, which means a new contractor would have to assess the amount of work to be undertaken in each of the projects. It is easier to undertake a greenfield project rather than a brownfield one,” Babel said.
A quick looks at NBCC’s order book shows it has undertaken residential projects across the country–from Patna to Kochi.
It has also been busy in Delhi and the national capital region. Its Green View project in Gurgaon’s Sector 37-D is spread over 17.2 acres, while NBCC Heights in Sector 89 in Gurgaon has come up on 11.31 acres.
In Delhi’s East Kidwai Nagar, it is redeveloping 86 acres, a project worth more than Rs 5,000 crore. It is also building around 10,000 units as part of a redevelopment plan in South Delhi. It is a Rs 24,000-crore project.
This, say real estate experts on condition of anonymity, does indicate that NBCC can deliver. It is probably preferred over the Central Public Works Department, another government leading construction agency, because its annual turnover is about Rs 10,000 crore, with a salary bill of Rs 300 crore.
“It is preferred because time and cost overrun is nil compared to CPWD, which has a salary bill of around Rs 2,000 crore against work execution turnover of Rs 15,000 crore. CPWD salaries are paid from the consolidated fund of India,” said an expert on condition of anonymity.
NBCC declined to respond to queries.