Controversy is nothing new for Emaar Properties. Dubai’s leading real estate group has hit the headlines afresh with the arrest of Andhra Pradesh principal secretary (home), B P Acharya, in connection with a Hyderabad upmarket housing project, Boulder Hills, jointly promoted by Emaar-MGF and Andhra Pradesh Industrial Infrastructure Corporation (APIIC).
Among earlier instances where the joint venture (JV) faced rough weather are over its Common-wealth Games housing project in Delhi, approval issues for some residential plans, regulatory hurdles in its proposed IPO, scrapped plans, late delivery of projects and the probe into the alleged Andhra land scam by various investigative agencies. The buzz over a break-up in the partnership between Emaar and MGF has also been a constant over the years.
Emaar, with operations in 14 countries, joined the real estate race in India in a JV with MGF Development in 2005. Apart from upmarket residential, the JV works across high street retail malls and luxury hotels, too.
While the buzz of a break-up between the two partners has been doing the rounds for long, both have maintained on different occasions that they remain committed to the India business. A spokesperson at the Dubai headquarters of Emaar said she could not comment anything on the India market, including on the partnership matter. Emaar MGF could not be reached for comments either.
Industry sources in the know of things point at the false start that Emaar-MGF had in its India journey. Emaar’s entry in 2005 started with Punjab Urban Planning and Development Authority issuing a notice to the company for advertising in newspapers seeking pre-launch booking of plots without having the requisite licence to do so. It was asked to withdraw the advertisement and refund the amount if received.
On the way, there have been other instances of the company’s strategies not working as planned. It had planned a five-star hotel in Dehradun, but it never took off, for example, says an industry source close to the company. Emaar MGF and Inter Continental Hotel group had entered into a memorandum of understanding (MoU) with the Uttarakhand State Tourism Department in 2008 to construct the five-star hotel on PPP mode. The tourism department had given 10 acres of land to the company however, the project never started, he adds.
Emaar MGF had three failed attempts to launch an initial public offering (IPO). The company had first hit the capital market to raise Rs 7,000 crore through an IPO in 2008, but withdrew it due to poor market response. Later on September 29, 2009, Emaar MGF filed its prospectus for the second time to raise Rs 3,850 crore through an IPO. In March 2010, it even got approval from Securities and Exchange Board of India (Sebi) to launch the public offer. In September 2010, Emaar MGF had, for the third time, filed revised application with the Sebi to raise Rs 1,600 crore through a public offer. But it never came out with one.
Emaar chairman Mohd Ali Alabbar had told the Indian media early 2010 that the company was trying to launch an IPO in the next 90 days. More recently, the company was in the news over non-delivery of the CWG flats. Emaar-MGF posted a net loss of Rs 205.94 crore for the year ended March 31, 2011. “The issue is that Emaar and MGF did not leverage on each others’ strength,” according to an analyst.
Yesterday, the Central Bureau of Investigation arrested senior IAS officer B P Acharya in connection with the Emaar-APIIC scam. Acharya was managing director of the APIIC when the scam took place. He allegedly played a key role in the dilution of the corporation’s equity from 49 per cent to 26 per cent and then to six per cent in a township developed by the Emaar MGF group. The alleged reduction in equity caused a loss to the exchequer, but no estimate has been made of the loss yet.
The CBI, which is set to file a chargesheet in this case tomorrow, is likely to question senior officials of the Emaar group. A senior CBI official said the agency was looking into all aspects of the case. “There is a case of conspiracy between the company and the government,” he said. “There has been an exchange of favours between the two parties.”
