Real Estate & Shadow Banking – India’s looming crisis | Ep.90 #TheDeshBhakt with Akash Banerjee
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Real Estate & Shadow Banking – India’s looming crisis | Ep.90 #TheDeshBhakt with Akash Banerjee


With a heavy heart and tears in their eyes, these people have only one question. Will they get their homes or not? In Delhi NCR’s Noida you can often see such protests No. No. No. Don’t mistake these people for JNU’s tukde tukde gang. They are neither student protestors, nor political party workers. Probably, that’s the reason why nobody is paying heed to them. But then who listens to middle class anyway? These are the people who believed in real estate’s biggest gimmick and put their money into it. Either their lifelong savings or high interest loans from the bank. Jaypee Infratech in 2007 had announced that on Noida-Greater Noida Expressway they would build a mega township with more than 30,000 flats called Wishtown. Back then the buyers did not realize that this township would only remain a wish. It has been 10 years now, or probably more. Only a few flats have been delivered, and the rest of it is in ruins. Today, Jaypee wishtown is close to being auctioned. Jaypee’s owners, Gaurs are playing their own game and the bank theirs. While the poor home buyers are out on streets and the government is quietly watching as it unfolds. Like they did in the case of Jet airways, where 20,000 people lost their jobs. And in this case 20,000 flats or 20,000 dreams or 20,000 families are going to be severely affected. Real estate crisis or shadow banking is going to the next biggest crisis of our economy. Houses worth more than 100 billion dollars have been constructed but there is nobody to buy them. Loans worth 200 billion dollars are stressed or have been defaulted. Ever wondered why you never heard or read much about it? Is it because the newspapers profit buy printing real estate advertisements. And moreover the slogan “Economy is in crisis” does not sound as sexy. [as Hindus are in danger.] And politicians have a lot to gain from the real estate. For example look at Jaypee, BSP gave them cheap land, SP gave them building permits and additional projects. and Congress supported them from center. Their high profile and senior ministers like Kapil Sibal, were lawyers for Jaypee. When BJP’s Yogi Aditynath came in UP, people were relieved as he promised to look into the builders and set them straight. But he also got into religious politics and the middle class buyers took the beating. And as a result, in the field of real estate Jaypee crisis has become the biggest. But Jaypee is not alone, to understand Jaypee and real estate crisis, it is very important to understand the country’s second biggest crisis. See, there is already a banking crisis in our country and nobody is denying it anymore. Likewise nobody is denying that the GDP is slowing. Non performing assets or NPAs have reached up to 10 trillion rupees. Out of this public sector banks or PSBs account for about 9 trillion rupees. That means the 86 % of NPAs in this country come from public sector banks. 10 years ago NPA in our country was about half a billion rupees That means in a decade, the NPA has grown about 20%. India is the world’s number one major economy that has the worst non-performing loan ratio. In layman terms the big businessmen do not repay the loans. If you and I do that, the bank will screw us. By the way Italy was on the top when it came to worst performing loan ratio but we have replaced them . The same Italy, Sonia Gandhi’s Italy. (Nehru is here too.) But on a serious note. This was the formal banking crisis. Now let us come to Indian shadow banking crisis. That has put enormous amounts of money into the Indian real estate. And a lot of construction took place in last few years. Shadow banking means investment banks, structured investment vehicles conduits, hedge funds non banking financial institutions, money market funds etc. Their logic was simple, leave the banks take money from us because the people will buy houses in any condition. And that actually happened for quite a few years. But when the economy slowed down, number of people buying the houses dropped, the repayment of loans dropped and hence the shadow banking was also affected. Formal banks had understood that the housing bubble is going to burst. That’s the reason why formal banks in last three years have not put any more money into real estate. But at the same time for shadow banking there was a 46 % increase in the funding in the last three years. And today that is the reason why companies like IL&Fs and Dewan housing finance corporation are in crisis Their stocks are falling steadily. And the party has only just begun. If you only consider India’s top 7 cities, there are 7 lakh homes that have not been sold. And out of these there are about a lakh that are ready to move in. but there is nobody to buy these. And now that the economy is slowing down, it is very difficult to get money from shadow banking too. Let me put it in simple terms, If your house is not ready yet, you are in deep trouble. So banks don’t have money, . shadow banks are screwed and economy is f**ked too Now you must be wondering where I went wrong, I have been paying EMIs for years, where is my house? Here we go back to Jaypee to understand how builder, banker, government, lawyer, politician together skin a middle class buyer. Point number 1. Jaypee did just what other builders do, took your money and invested it in some other project or bought more land, invested it or put in in some other business. or put it in their bank accounts. Basically they put your money everywhere other than building your house. But when the crisis hit the buyers asked for an audit to know where their money had gone. because clearly the houses were never built. So, since the last five years buyers are trying to get an audit But nobody is getting it done. Even the banks seem reluctant. because when everything comes out even banks would be implicated. So, even the flats that have been constructed are so poor in quality, that kids have fallen down into the shaft and the plaster has already started falling off in 2 years. These days the owners are trying to get structural audit for Jaypee Poor, simple people. Moving on to second point. Dates! 20,000 flat owners have waited for 6-8 years, for their turn to get the house. In every 2-3 years when things start getting serious, then Jaypee wakes up and makes a false promise of constructing the houses in near future. And everything subsides for sometime. There is no law, no system, no investigation to ensure that these culprits who take hundreds and crores of rupees go to jail. In fact this time the Gaurs have apologised on email and sent to the buyers. Please forgive us we have delayed for a few years, please give us a little more money, we will build the flats as soon as possible. So the flat owners said that we don’t require your apology, just give us the flats. Point number 3. Neither will I build nor let anybody build it too. It had become quite clear that sinking Jaypee would not build the mega-project. But they wouldn’t let it go either Just like Naresh Goyal was reluctant to let go off Jet, he did not hand over the control to lenders and hence Jet sank. Similarly the Gaurs are politicizing the Jaypee wishtown They are trying to derail the process of involvency. They are hoping for a stalemate, because the stalemate ensures nobody buys the project and they still retain control and can worry about it later. Point number 4 Men in Black Now you might think that since I invested the money and paid the EMIs then I should get the flat. But if you involve the laywers in this they would prove that it is the poor builder who is innocent, he undertook the risk that affected his health. You and I are at fault that we invested in the flats. And Jaypee might not have money to build, but they have enough to hire the top lawyers of the country. That’s why they have top guys like Kapil Sibal and Mukul Rohatagi represent them in court. You and I don’t even stand a chance here. Point number 5 In all of this the biggest looser is the middle class common man He doesn’t have his own house to live in. On one hand we has to pay the rent and on the other hand the EMI. The funny thing is if Jaypee is auctioned, and there are no flats, the buyer still has to pay the EMI to the bank. Point number 6 And auction brings us to the final and the most interesting point Pay attention, it is a little complicated. How are the government and government controlled banks pushing people under the bus? Jaypee was performing poorly and the deadlines were all over. Final, final final warnings had been given out. Efforts under the insolvency and bankruptcy code were being carried out to save Jaypee. Then buyers went to court, where it was decided that buyers would also be treated as creditors. They were given 58% voting rights. Buyers thought that with the voting powers they were powerful enough to decide who should take over Jaypee. Now we would get our flats. At the same time, NBCC a navratna builder offered to take over and deliver the flats in three years. Buyers were ecstatic. But when have things ended in happiness in India? With the NBCC entering the scene the buyers could no longer claim the late delivery charges. And the buyers agreed to it. But this meant that the banks would have to take loses. And Gaurs would have to let go off Jaypee. This did not go down well with Gaurs. As a result all the the high profile people started pulling strings. They replaced NBCC’s chief. Banks like IDBI said, we do not agree with this and don’t want reconstruction either, or a solution. We want auction. Because they felt if there was an auction they would get more, because in that case buyers wouldn’t get a penny. All the buyers want NBCC to take over and deliver their flats. But for NBCC to take over, they need 66% vote. But only about half the buyers have been able to cast their electronic vote. The reasons are plenty, some are in the country while others are not. Some understand this, others don’t. If you include some of the smaller banks, it is very difficult to get 66% votes in favor of takeover. So it seems like even after waiting for years 20,000 people wouldn’t get their houses. There would be an auction and they would get close to nothing. If we were to look AMR infrastructure’s recent case whatever percentage of buyers voted, that was considered the majority view by the court. Now in this case, IDBI is a government controlled bank The government can influence it in any way. So even though it may sound complicated but is quite simple. Does Modi 2.0 government want another Jet air ways in real estate? What is more important, 20,000 middle class people or the system and its rules and regulations? Should the builder be punished or the home owner? The voting is going on, by 10th we would know if the biggest meltdown in the real estate will take place or not, just like it did for Jet Airways. Usually I do not bring my personal matters into my episodes on this channel. But Jaypee is a national story and my personal story. Personal because my parents wanted to live in Delhi. So I invested their money in Jaypee so that my parents can live in Delhi NCR Their dreams also crashed And on researching about it I understood how big this real estate problem is. And nobody is talking about it. And how these builders manipulate the system. How many builders are there? Probably thousands. How many had to go to jail? You and I both know that. A common man can come on streets but but the Gaurs will keep going around in their Mercedes S class. Nobody can even touch them. And it is surprising that all of this is transpiring in the national capital and the government is a silent spectator. A lot of people still feel Modi is back and with him everything is possible. I do not have any hope but I hope I am wrong. And the government steps in says enough is enough, you cannot play with common man’s rights. And you will have to pay for the wrongdoing. That would be a lesson to the builders that you cannot scam people. You tell me if you liked the episode. If it was a little too serious, next time I will get Bhakt Banerjee. Like, dislike, share, comment. And if you want to support the Deshbhakt patreon.com/akashbanerjee is the link Go there and support us If you are an international donor, paypal is the option. If you want to make a one time donation in India, then there is instamojo Thanks for watching. I would be back soon with such episodes.

100 Comments

  • ompal singh

    Akash we as chartered accountant, who are entrusted with responsibility of audit don't perform well and are corrupt and hence equally responsible for such crisis .

    Aachi se audit kr k report render krte to sayad yh nhi dekhna pdta

  • Sandeep Pathak

    Dude .. have you ever thought if government steps in and provides Flats to these 20,000 ppl.. every person who has been de-frauded by a builder will be standing at their door. So all the money instead of going into development of the nation, will go to help just a handful. I have been following your videos but this one, i dislike. Hope you keep your personal matters away from the wider range of things. I'll give you better idea to make a video on, depleting water table around the country and how this can be overcome by making it mandatory to have rain water harvesting for every society and houses. This incentive backed by the government will not only help a handful but way more than 20,000 people.

  • Ashish Gupta

    Mantri WebCity project in Bengalore from class A builder Mantri Developer Pvt Ltd (Sunil Mantri & Snehal Mantri) and PNB Housing Finance is one similar scheme which has taken some 500+ home buyers for a ride. Please do a video story for this project as well.

  • Russel DSouza

    It is mind numbingly baffling to see no resolution as yet to the Wish Town crisis ! So much for the power of the BJP and it's tall claims of excellent delivery. This is daylight robbery by the Gaurs and they should be in JAIL just like the Sahara case !

  • Mohammed Zain

    Akash ji this is good one… this is called reporting..
    Request you to make story on Health ecosystem of India, especially related to cancer

  • Raj guleria

    Good episode ….you hit the nail….please do similar stuff in school systems especially kindergarten and these 'world school' tagged loot machines all around NCR ..especially in Gurgaon !

  • Suman Dutta

    Great video and I agree with others you really hit the nail. We really needed strong rules to safeguard common citizen's rights.

  • suryapratap singh

    Thank you sir for highlighting this issue… This is really an eye opener. I was aware about the crisis in real estate but this can be the biggest real estate meltdown for the nation.

  • Soumil Agarwal

    Builders are only responsible as because of their greed they diverted hard earned money of current customers to different projects. Why to bite big when you cant chew small. If you complete existing projects then your goodwill increase.

    I am speaking as a first hand witness of loss of my parents hard earned life savings who thought investing their money for an asset in future . In their case it was 3Cs Noida Lotus Panache.

  • Bharath santhosh

    Sorry for your personal lose and for all those who were betrayed.. hope it comes to a favorable conclusion…This was very informative… thanks a lot bhai

  • vaibhav dangi

    Thanks for this news.. impressed.. at least someone is talking abt middle class people n not abt Hindu Muslim… subscribed ur channel… love from gujrat

  • ankur shrivastava

    Behen ki ch*** ye sab issues saale TV mae nahin dikhate hai!!! I was actually planning to invest in some property in Noida!😳 Thank you for this video!

  • sandeep khandelwal

    Hello, i also accept that there are alot of projects in NCR as compared to demand…is RERA protecting the buyers?

  • world for kids

    You're intelligent journalist but what you're talking about is global crisis its not gona effect only India but whole world including Europe Australia America and Middle East countries and some where they're saying 2020 is the year of international stock crash

  • Mandeep Bangar

    Brother love you giving very good information about banking plzzzz keep it up now days news don't show all this god bless you love u ones again

  • tejas sonaje

    Are bhai 2014 se pehle ki ye problem hain… har cheej main modiji ka naam lena jaruri nahi hain… Andhbhakti to galat hain pr Andhvirodhi banana bhi imp hain…

  • Responsible citizen of India

    Who cares, where majority of our country men are uneducated or insufficiently educated to be blinded by the theme Hindu religion kathre me hei!!!

  • Manish Mishra

    Bade corporates SE le ke Galla wale baniye, India me businessman community sirf logon Ka khoon choos ke ameer hai. Angrezon ke time we ye log akaal me anaaj daba ke ameer bane Hain.

    But inke against koi Kabhi Nahin bolega.

  • Umakant Gairola

    Ye Ciachin kahan se aa gaya real estate mein hahahaha . Banks ko sarkar jinda isliye rakhti hai taaki wo aur unke ristedaar NPAs ban sake.

  • Keyur Shah

    Where were you when Congress was giving clearances to such projects. Saale ab bloody tropics le ke govt ko kosta hai. Idiots where were you at that time.

  • shaa141

    China has more than 5cr houses empty and crores of electronics device's which are not sold but they produced new electronics which can sell yu cannot link it to economy , agriculture sector is in crisis from 15 years only related sectors effected people's move from bad business to good business I am entrepreneur always live with stress and risk's in economy.
    Important thing do not pay in advance because for little bit profit I learned this truth from many many bad experience so just do not give your money in advance.

  • Dharmendra Bhatt

    vary good point and information but missing some key points.
    1. from 2009 to 2014 – 35 lac caror distributed from bank and result we now see all NPA, builder issue and bank issue.
    2. in nda 1 – they bring some tight rule on builder to prevent the future problem. old problem which was result due to corruption of upa-1 and 2 are so hugh and complex that will end up with bankruptcy.
    3. this problem is not just limited to india but it is all over world. every country has now too much debt that one day whole world see economy collapse.
    if you are not aware then search in youtube about "world economy collapse". count down is going on. see example of deutsche bank.

    summary – this congress has screwed india so badly that it will take too many year to fix.

  • Ani Bhattacharyya

    Those politicians should be forced in front of firing squad…..Govts are only responsible for this crisis.

  • akhtar raza

    Truly Appreciate you Sir.aap b Chaaho to Mandir Maajid kr ke Pese Kama Sakte ho but you are really doing great Job

  • Rickshawala Assam

    Our country is in severe debt crisis due to corruption at a very large and senior level. Now its only a matter a time before this financial mess bursts out! Bjp is playing with the lives of people which congress did in the past.

  • Sandesh Pawar

    I would have appreciated it if you had said this one year back. Whatever you spoke is sort of a general knowledge to anyone with financial literacy.
    However you are missing the bigger picture, every country goes through the lending cycle. That doesn’t mean it is a bubble. Economic slowdown is also cyclic, no country will go linear, that’s also because of the leverages involved in the business.
    During the slowdown the banks don’t lend, the nbfc’s that are depended on the banks struggle simply because of the asset mismanagement. They get loans from banks for shorter duration and they lend for longer duration that is the inherent risk in the business. Because nbfc’s don’t have money they don’t lend causing weakness in other sectors like automobile.
    Housing in india is not in a bubble territory people don’t have houses to live . Do you know a single property that is selling on discount, the projects are on stand still because there is no loans available for the public or companies , again because of lending cycle. It is simple as sentiments change, banks will gradually start lending and gradually things will improve.

  • Saibal Chakrabarti

    chutiye, Jet is private company, what is govt role in that, same with JP. would you expect govt will pay from govt taX.

  • Dev Bhadra

    Btw did u know of the few hundred crore worth new house on Barakhamba road that the Guars have built themselves… Could u do a research on that as well?

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  • KSHIROD CHANDRA MOHAPATRA

    Delhi ki cm kejerawala he, aur app ne unka interview lia tha during election, tab kuin app ne bola nahi Iss bare me??? App khan thhe tab??

  • Bruce Wayne Batman

    Sirf builder ki galti nahi he.
    Because ek-do builders galat ho sakte he sabhi nahi. And sarkar bhi equal javabdar he iake liye. Note bandi is main reason.
    Tabhi to sarkar builders ke khilaf koi action nahi leti.

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