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Mumbai, 30th August, 2016: To recover its Rs 100 crore project loan to RNA Exotica before it becomes a bad debt like BOI's loan and SBI's loan, Axis Bank is pressing the panic-button and threatening flat-buyers to immediately pre-pay large amounts (like Rs 25-50 lakh), forgetting about slab-completion schedules. Axis Bank has recently written strangely worded letters to RNA's Skyline Construction Co in respect of each and every flat (see specimen), saying that unless the entire remaining amount of the flat's consideration is remitted to its designated account, RNA Corp will not be allowed to sell the said flat to the name of the buyer. These letters, which are supposedly "No Objection Certificates" for the sale of flats to the purchasers, are being lovingly forwarded by RNA Corp to the individual flat-buyers with a tiny email (see example). Axis Bank's relayed letter is like holding a gun to the heads of helpless flat-buyers and saying: "Pay everything right now! Or else you will never get your flat!" And RNA Corp's forwarding email seems to suggest, "Yes, forget about installment payments based on slab-completion schedule. Just pay 100% right now".

In fact, Axis Bank's letter has come as a jolt to many buyers who were unaware that their flat was mortgaged by RNA to Axis Bank! Hundreds of RNA Exotica's buyers are suffering from sleepless nights, trying to figure out what course of action will be in their long-term interest. "Should we just pay the remaining amount to Axis Bank, so that it will release the lien over our flats? Or should we continue to pay in installments according to slab completion stages? Or should we go to Consumer Court? Or Civil Court? Or High Court? Or what?!!!" They are at a loss as to what to do next!

Axis Bank Threat

[NOTE: In our earlier article titled How RNA Corp taught ExoticArithmentic to Axis Bank, we revealed how Skyline Construction Co mortgaged unsold flats of RNA Exotica in 2011 and 2013 based on hugely inflated and completely unverifiable figures. Axis Bank gave the builder a Rs 75 cr line of credit in March 2011, and beefed it up to Rs 100 crore in March 2013, although the value of the collateral fell sharply.

Also, in RNA Exotica: Nine ways buyers got screwed, we analyzed the negative implications of the sale-purchase agreement.]

Now let us analyze the letter written by Axis Bank, supposedly addressed to Skyline Construction Co., but actually addressed to the flat-buyer directly. The subject line says, "No Objection for Release of Charge for Sale of Flat no. XXX in Building no. B Wing of RNA Exotica in favour of Mr YYY." The letter goes on to say:

  • RNA Exotica has been mortgaged exclusively to Axis Bank for a sanctioned line of credit of Rs 100 crores.
  • The said flat no. XXX is sold/proposed to be sold to Mr. YYY for a total consideration of Rs 1.8 crore (or some such amount), and that "We have been requested to issue our NO Objection for the said sale".
  • "We wish to inform you that we have No Objection for Release of Charge on the said premises to enable you to sell the said premises to said Mr YYY... subject to the specific condition that the total consideration mentioned above shall be deposited in designated account no ABCXYZ maintained with the Bank. Provided that if the Bank is not in receipt of the said sum of Rs 29.26 lakh in the designated amount as aforementioned, this NOC shall not have any effect and shall be deemed to be cancelled... and the charges over the said premises shall not stand released."

No, this is not really a "No Objection" letter; it is actually an Objection letter from Axis Bank to the flat-buyer with whom it really has no direct connection, and as such, it is illegal. As Axis Bank has given a project loan to the builder and not a home-loan to the buyer, it has no business communicating with the home-buyers.

IMPLICATIONS OF AXIS BANKS'S LETTER:

  1. REGISTERING OF SALE-PURCHASE AGREEMENTS MAY BE HELD UP. Home-buyers who already have a registered sale-purchase agreement are slightly more safe. But, for those buyers who only have an Allotment Letter from the builder, this letter implies that they will not be allowed to register their agreement until they have paid 100% of the consideration amount and got an NOC from Axis Bank.
  2. CONFLICTS WITH HOME-LOAN LENDING BANKS. Home buyers who have taken a home-loan from another bank may be in a fix. Their bank will insist on releasing funds only according to slab-completion, and therefore, they will never get Axis Bank's NOC until the final payment is made... and so, they may have to wait till that stage for registering their agreement.
  3. HUGE PRESSURE ON SELF-FINANCED BUYERS. On the other hand, home-buyers who did not take a home-loan may feel under pressure to pay the entire remaining amount of Rs 25 to 50 lakhs, or even more, all at once. Do they have the capacity to pay such amounts immediately?
  4. PAYING 100% NOW MEANS BEING AT THE BUILDER'S MERCY. If home-buyers succumb to the temptation of making 100% payment at this stage, then what financial power do they retain in their hands? After paying 100%, they are totally at the builder's mercy. Currently, construction activity is going on at the 33rdfloor slab. Even if one assumes that the building is only 35 floors (and not 40 floors), a huge amount of construction work still remains, namely brick-work, plumbing and drainage, electricals, plastering, flooring, interiors, fixtures, lifts, stairs and common amenities such as clubhouse, etc. etc. At least two more years of work -- or about 50% of the work – is still remaining to be done before the flat-owners can get possession. What if Skyline Construction Co stops work and claims that it has run out of money? What if it demands more money – say another 20 lakh per flat – to complete the project? Going to court may not sound like such a good option then, and flat buyers will be left with no option except to pay whatever the builder asks.

What is the solution to all this? One possible solution could be that flat buyers should pay this amount to Axis Bank, but only after filing a civil case and after RNA Corp gives an undertaking to the court that they will complete the project within a deadline. Groups of flat-buyers are reportedly planning to take some such step, although these discussions are still at a preliminary stage.

Aagey dekhiye, iss dhaaravahik ki Ugly kadee!

ISSUED IN PUBLIC INTEREST BY

Krishnaraj Rao

9821588114

krish.kkphoto@gmail.com

WITH MAJOR INPUTS FROM

Sulaiman Bhimani

9323642081

sulaimanbhimani11@gmail.com

3

Media Release: RNA Corp teaches Exotic Arithmetic to Axis Bank! "One-two-ka-four, four-two-ka-one, my name is Lakhan"

22nd June, 2016: When builder Anil Aggarwal's Skyline Construction Co approached Axis Bank for a project loan for RNA Exotica in 2011, the bankers forgot simple arithmetic. On two separate instances -- in 2011 and in 2013 -- Axis Bank's SME loans division gave loans of Rs 75 crore and Rs 100 crore against hugely inflated mortgages of floor space in RNA Exotica. The flat size was inflated by 500 to 700 square feet per flat, and the number of unsold flats mortgaged was inflated by a couple of hundred flats in 2013. Anil Aggarwal, like Anil Kapoor (you know, the chap who sang, "One-two-ka-four, four-two-ka-one, my name is Lakhan") sang a seductive song to Axis Bank executives, who were more than willing to be seduced.

The late Anil Aggarwal's version of one-two-ka-four sounds like this: "770 square feet flat ka 1299 and 979 sq. ft. ka 1650... My name is RNA Corp! Jadoogar Anil Agarwal said 168 sold flats in 2011, but 66 sold flats in 2013. Numbers mein kya rakha hai? Now gimme your money, sweetheart."  The sweethearts at Axis Bank gave the builder a Rs 75 cr line of credit in March 2011, and beefed it up to Rs 100 crore in March 2013, even as the value of the collateral fell sharply!

RNA Exotica's Flat Sizes are on Steroids:

  • Skyline Construction Co's registered mortgage deeds in 2011 (and 2013) based on inflated and unverifiable figures, viz. 1299, 1650 and 1699 sq. ft. The correct sizes i.e. carpet areas, viz 770 and 979 sq. ft. are readily available through the flats' sale agreements.
  • The sale deed of flat no. D-1903 booked by actor Arif Zakaria shows 979 sq. ft. whereas the mortgage deed shows 1650 sq. ft. So, RNA Corp has represented to Axis Bank that this flat is 671 sq. ft. larger than its actual carpet area! And Axis Bank has unquestioningly accepted this figure as a basis for its mortgage!

This raises the question whether Axis Bank has double-standards – one for people like you and me, and another for people like Anil Aggarwal. Would Axis Bank have sanctioned a loan against our flats if you and I cited Super Built Up area instead of the carpet area?

Axis Bank loan was Supersized while RNA Exotica was Downsized:

  • RNA's Skyline Construction Co.'s March 2011 loan was of Rs 75 crore. In March 2013, Skyline prepaid the RNA Exotica project loan and got the mortgage released, and immediately took a fresh loan of Rs 100 crore. Unsold flats of RNA Exotica were mortgaged to Axis Bank. The 2011 mortgage deed shows the number of sold flats as 168 (2,41,350 sq. ft.), with a table of flat-buyers' names and flat numbers. The 2013 mortgage deed claims that the number of sold flats supposedly dropped down to 66 (i.e. 94,951 sq. ft.). How? Did Skyline sales staff spend two years buying back over 100 flats from investors, instead of selling additional flats? There is no table of sold and unsold flats in the March 2013 mortgage deed.
  • Why this reduction in the number of sold flats? Because RNA Corp, which had gone to town in 2010 claiming that RNA Exotica would be a 48-storey tower, (i.e. 10 floors podium parking, one floor E-deck, plus 37 upper floors) was not getting MMRDA's permission for building that many floors.
  • The March 2011 mortgage deed is based on calcuations of 30 upper floors (i.e. 459 flats, 16 flats per floor). In March 2013, there is reduction of 35 flats. That means roughly two floors less, bringing the total to about 28 upper floors. But is that final? NO!
  • According to a source at MMRDA, RNA Corp in June 2016 has permission to build only 21 upper floors. Frantic efforts are being made by the builder to get this raised to 25 upper floors. Even if such efforts succeed, further reduction of 48 flats will happen – i.e. a total reduction of about 80 flats. The top floor will be 36th floor (i.e. 10+1+25).
  • The falling expectations show in the sale agreements. Whereas Kushan Pritish Nandy's sale agreement registered in October 2014 said 30 upper floors, Arif Zakaria's sale agreement in August 2015 mentioned 25 upper floors!

One two ka four 1

Why Financial Jugglery was done:

In 2013, Anil Aggarwal's big problem was: How to get a higher loan amount sanctioned from Axis Bank against a much smaller mortgage? The solution was: by reducing the number of sold flats, the "stock" of mortgagable unsold flats would appear higher. (So, what is the real number of sold flats? My guesstimate is: if 168 flats were already sold in March 2011, then 100 more flats in the next 24 months @ four flats per month. So, 268 sold flats were falsely declared as 66 flats. If each flat is valued at Rs 1.5 cr on average, the property mortgaged to Axis Bank was worth Rs 300 cr less than claimed!)

If the building is of only 36 floors including podium, what will happen to flats such as these where sale agreements have been registered for flats on the 40th floor etc? Will the investors be compensated by RNA Corp for not delivering of the promised flats after paying money and waiting for several years?

All this financial jugglery for downplaying the risk of RNA Exotica becoming a Stressed Asset! RNA Corp has defaulted on smaller loans from Bank of India and State Bank of India. This auction notice says that RNA Corporate Park defaulted on SBI for Rs 61.50 crore, for which mortgaged land parcels in Palghar district will be auctioned. And this letter from Bank Of India to the secretary of RNA Royal Park, Kandivali, tells a similar story of default and bank recovery proceedings.

SBI is struggling to recover an amount of Rs 61.5 cr by auctioning land plots that turned out to be under CRZ, and therefore valued at a fraction of the original projected values. Will the one-two-ka-four loan transaction of RNA Exotica and Axis Bank have a similar ending? Wait and watch.

This story is based on inputs from RTI activist Sulaiman Bhimani 

(9323642081, sulaimanbhimani11@gmail.com).

ISSUED IN PUBLIC INTEREST BY

Krishnaraj Rao

9821588114

krish.kkphoto@gmail.com

 Links of articles related to RNA Corp. Misdeeds

 

Press Release: Slippages & Shrinkages in RNA Exotica, Oshiwara

19th June, 2016: Welcome to RNA Exotica, a premium building project by Skyline Construction Co, owned by Saranga Anil Aggarwal, where deadlines keep slipping and the number of flats to be constructed keeps shrinking year after year. The number of flats to be constructed has dropped by at least 80 since the March 2011, and the project completion date has slipped by six years. Further shrinkages may lie ahead, and slippages in possession date are definitely forecast. Also, visible manipulation of facts and figures in official documents should make investors sit up and wonder what is going on behind the scenes.
 
The gory details: 
  1. In Axis Bank's first mortgage deed registered in March 2011, RNA Exotica's project completion date was mentioned as September 2012. Given the amount of work that had to be completed within 18 months by Skyline Construction Co, the deadline was obviously a bare-faced lie. Axis Bank's first loan to RNA's Skyline Construction Co for the project was of Rs 75 crore. At that time, 459 flats were to be constructed i.e. 30 floors of 16 flats each, plus 11 floors of common amenities such as parking etc. Unsold flats and future receivables of RNA Exotica were offered as mortgage. The number of sold flats was mentioned as being 168 (2,41,350 sq. ft.), and purchasers' names and flat numbers were mentioned in tabular form.
  1. In March 2013, Skyline got the mortgage released and immediately took a fresh loan of Rs 100 crore from Axis Bank for the same project. In the second mortgage deed registered in March 2013, the project completion date mentioned is March 2016-- which turned out to be another lie, causing anxiety and financial distress to many of the investors. In the 2013 mortgage deed, the project parameters changed quite dramatically. The total number of flats to be built in RNA Exotica were reduced by 35 (i.e. height reduction of two or three floors), and the number of sold flats miraculously dropped down to 66 (94,951 sq. ft.) only. (How? Did RNA Corp buy back flats from its investors?) Particulars of sold and unsold flats were not mentioned in this mortgage deed.
  1. After a meeting with angry investors on 5th May 2016, RNA Corp issued a statement signed by some unnamed spokesperson, that flats' possession will be given in December 2017. Judging from the present progress of RNA Exotica's construction, this also is a lie. Also, further reduction of the building's height is a high probability. According to MMRDA sources, the sanctioned number of floors currently is 11+21 floors. Will it go up to 25 floors? Possibly, but not necessarily. This height reduction reflects in registered agreements. Producer Kushan Pritish Nandy's flat purchase agreement registered in 2014 said 30 upper floors.Actor Arif Zakaria's purchase agreement registered in August 2015 said 25 upper floors. Reduction of even five floors (30 minus 5) means approximately 80 flats less than earlier planned, and the top floor would be the 36th floor (11 plus 25). So what will happen to sale-purchase agreements registered for flats on 40th floor etc?
  2. SRi SRI is popular for Art of Living, RNA Corp. is popular and infamous for Art of Lying and Art of Selling Non Existing Floors in the air (Hawa Mahal)
    Many twists and turns lie ahead. Dekhte rahye iss dhaaravahik ki UGLY kadee!
(Deep gratitude and appreciation to Sulaiman Bhimani (9323642081) for tracking this case over the past six years, digging up documents and interviewing sources.)
ISSUED IN PUBLIC INTEREST BY

Krishnaraj Rao
9821588114