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Real Estate & Shadow Banking - India's looming crisis | Ep.90 #TheDeshBhakt with Akash Banerjee - YouTube
Channel: The Deshbhakt
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With a heavy heart and tears in their eyes, these people have only one question.
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Will they get their homes or not?
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In Delhi NCR's Noida
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you can often see such protests
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No. No. No. Don't mistake these people for JNU's tukde tukde gang.
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They are neither student protestors,
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nor political party workers.
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Probably, that's the reason why nobody is paying heed to them.
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But then who listens to middle class anyway?
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These are the people who believed in
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real estate's biggest gimmick
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and put their money into it.
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Either their lifelong savings or high interest loans from the bank.
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Jaypee Infratech in 2007 had announced
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that on Noida-Greater Noida Expressway
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they would build a mega township with more than 30,000 flats
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called Wishtown.
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Back then the buyers did not realize that this township
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would only remain a wish. It has been 10 years now,
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or probably more.
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Only a few flats have been delivered, and the rest of it is in
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ruins.
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Today, Jaypee wishtown is close to being auctioned.
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Jaypee's owners, Gaurs are playing their own game and the bank theirs.
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While the poor home buyers are out on streets and the government
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is quietly watching as it unfolds.
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Like they did in the case of Jet airways, where 20,000 people
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lost their jobs. And in this case 20,000 flats
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or 20,000 dreams or 20,000 families
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are going to be severely affected.
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Real estate crisis or shadow banking
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is going to the next biggest crisis of our economy.
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Houses worth more than 100 billion dollars have been constructed
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but there is nobody to buy them.
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Loans worth 200 billion dollars are stressed or have been defaulted.
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Ever wondered why you never heard or read much about it?
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Is it because the newspapers profit buy printing real estate advertisements.
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And moreover the slogan "Economy is in crisis" does not sound as sexy. [as Hindus are in danger.]
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And politicians have a lot to gain
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from the real estate.
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For example look at Jaypee, BSP gave them cheap land,
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SP gave them building permits and additional projects.
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and Congress supported them from center.
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Their high profile and senior ministers like Kapil Sibal,
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were lawyers for Jaypee.
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When BJP's Yogi Aditynath came in UP, people were relieved
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as he promised to look into the builders and set them straight.
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But he also got into religious politics and
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the middle class buyers took the beating.
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And as a result, in the field of real estate Jaypee crisis has become the biggest.
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But Jaypee is not alone, to understand Jaypee and real estate crisis,
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it is very important to understand the country's second biggest crisis.
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See, there is already a banking crisis in our country and nobody is denying it anymore.
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Likewise nobody is denying that the GDP is slowing.
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Non performing assets or NPAs have reached
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up to 10 trillion rupees.
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Out of this public sector banks or PSBs account for about 9 trillion rupees.
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That means the 86 % of NPAs in this country come from public sector banks.
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10 years ago NPA in our country
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was about half a billion rupees
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That means in a decade, the NPA has grown about 20%.
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India is the world's number one major economy that has the worst non-performing loan ratio.
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In layman terms the big businessmen do not repay the loans.
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If you and I do that, the bank will screw us.
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By the way Italy was on the top when it came to worst performing loan ratio but we have replaced them .
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The same Italy, Sonia Gandhi's Italy. (Nehru is here too.)
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But on a serious note.
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This was the formal banking crisis.
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Now let us come to Indian shadow banking crisis.
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That has put enormous amounts of money into the Indian real estate.
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And a lot of construction took place in last few years.
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Shadow banking means investment banks, structured investment vehicles
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conduits, hedge funds
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non banking financial institutions, money market funds etc.
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Their logic was simple, leave the banks
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take money from us because the people will buy houses in any condition.
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And that actually happened for quite a few years.
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But when the economy slowed down, number of people buying the houses dropped,
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the repayment of loans dropped and hence the shadow banking was also affected.
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Formal banks had understood
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that the housing bubble is going to burst.
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That's the reason why formal banks in last three years have not put
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any more money into real estate.
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But at the same time for shadow banking
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there was a 46 % increase in the funding in the last three years.
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And today that is the reason why companies like IL&Fs and
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Dewan housing finance corporation are in crisis
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Their stocks are falling steadily.
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And the party has only just begun.
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If you only consider India's top 7 cities,
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there are 7 lakh homes that have not been sold.
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And out of these there are about a lakh that are ready to move in.
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but there is nobody to buy these.
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And now that the economy is slowing down,
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it is very difficult to get money from shadow banking too.
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Let me put it in simple terms,
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If your house is not ready yet, you are in deep trouble.
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So banks don't have money, .
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shadow banks are screwed and economy is f**ked too
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Now you must be wondering where I went wrong,
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I have been paying EMIs for years, where is my house?
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Here we go back to Jaypee to understand
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how builder, banker, government, lawyer, politician together
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skin a middle class buyer.
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Point number 1.
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Jaypee did just what other builders do,
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took your money and invested it in some other project or
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bought more land, invested it or put in in some other business.
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or put it in their bank accounts.
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Basically they put your money everywhere other than building your house.
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But when the crisis hit the buyers asked for an audit
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to know where their money had gone.
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because clearly the houses were never built.
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So, since the last five years buyers are trying to get an audit
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But nobody is getting it done.
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Even the banks seem reluctant.
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because when everything comes out
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even banks would be implicated.
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So, even the flats that have been constructed
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are so poor in quality, that kids have fallen down into the shaft
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and the plaster has already started falling off in 2 years.
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These days the owners are trying to get structural audit for Jaypee
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Poor, simple people.
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Moving on to second point.
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Dates!
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20,000 flat owners have waited for 6-8 years,
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for their turn to get the house.
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In every 2-3 years when things start getting serious,
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then Jaypee wakes up and makes a false promise of constructing the houses in near future.
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And everything subsides for sometime.
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There is no law, no system, no investigation to ensure that these culprits
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who take hundreds and crores of rupees go to jail.
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In fact this time the Gaurs have apologised on email and sent to the buyers.
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Please forgive us we have delayed for a few years,
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please give us a little more money, we will build the flats as soon as possible.
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So the flat owners said that we don't require your apology,
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just give us the flats.
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Point number 3.
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Neither will I build nor let anybody build it too.
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It had become quite clear that sinking Jaypee would not build the mega-project.
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But they wouldn't let it go either
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Just like Naresh Goyal was reluctant to let go off Jet,
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he did not hand over the control to lenders and hence Jet sank.
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Similarly the Gaurs are politicizing the Jaypee wishtown
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They are trying to derail the process of involvency.
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They are hoping for a stalemate,
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because the stalemate ensures nobody buys the project and they still retain control
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and can worry about it later.
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Point number 4
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Men in Black
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Now you might think that since I invested the money and paid the EMIs then I should get the flat.
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But if you involve the laywers in this
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they would prove that
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it is the poor builder who is innocent,
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he undertook the risk that affected his health.
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You and I are at fault that we invested in the flats.
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And Jaypee might not have money to build,
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but they have enough to hire the top lawyers of the country.
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That's why they have top guys like Kapil Sibal and Mukul Rohatagi represent them in court.
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You and I don't even stand a chance here.
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Point number 5
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In all of this the biggest looser is the middle class common man
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He doesn't have his own house to live in.
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On one hand we has to pay the rent and on the other hand the EMI.
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The funny thing is if Jaypee is auctioned,
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and there are no flats, the buyer still has to pay the EMI to the bank.
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Point number 6
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And auction brings us to the final and the most interesting point
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Pay attention, it is a little complicated.
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How are the government and government controlled banks pushing people under the bus?
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Jaypee was performing poorly and the deadlines were all over.
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Final, final final warnings had been given out.
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Efforts under the insolvency and bankruptcy code were being carried out to save Jaypee.
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Then buyers went to court, where it was decided that buyers would also be treated as creditors.
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They were given 58% voting rights.
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Buyers thought that with the voting powers they were powerful
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enough to decide who should take over Jaypee.
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Now we would get our flats.
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At the same time, NBCC a navratna builder offered to take over
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and deliver the flats in three years.
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Buyers were ecstatic.
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But when have things ended in happiness in India?
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With the NBCC entering the scene the buyers could no longer claim the late delivery charges.
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And the buyers agreed to it.
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But this meant that the banks would have to take loses.
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And Gaurs would have to let go off Jaypee.
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This did not go down well with Gaurs.
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As a result all the the high profile people started pulling strings.
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They replaced NBCC's chief.
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Banks like IDBI said,
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we do not agree with this
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and don't want reconstruction either, or a solution.
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We want auction.
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Because they felt if there was an auction they would get more,
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because in that case buyers wouldn't get a penny.
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All the buyers want NBCC to take over and deliver their flats.
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But for NBCC to take over, they need 66% vote.
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But only about half the buyers have been able to cast their electronic vote.
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The reasons are plenty, some are in the country while others are not.
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Some understand this, others don't.
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If you include some of the smaller banks,
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it is very difficult to get 66% votes in favor of takeover.
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So it seems like even after waiting for years
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20,000 people wouldn't get their houses.
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There would be an auction and they would get close to nothing.
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If we were to look AMR infrastructure's recent case
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whatever percentage of buyers voted, that was considered the majority view by the court.
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Now in this case, IDBI is a government controlled bank
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The government can influence it in any way.
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So even though it may sound complicated but is quite simple.
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Does Modi 2.0 government want another Jet air ways in real estate?
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What is more important, 20,000 middle class people or
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the system and its rules and regulations?
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Should the builder be punished or
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the home owner?
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The voting is going on, by 10th we would know
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if the biggest meltdown in the real estate will take place or not, just like it did for Jet Airways.
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Usually I do not bring my personal matters into my episodes on this channel.
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But Jaypee is a national story
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and my personal story.
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Personal because my parents wanted to live in Delhi.
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So I invested their money in Jaypee
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so that my parents can live in Delhi NCR
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Their dreams also crashed
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And on researching about it I understood how big this real estate problem is.
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And nobody is talking about it.
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And how these builders manipulate the system.
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How many builders are there? Probably thousands.
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How many had to go to jail? You and I both know that.
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A common man can come on streets but
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but the Gaurs will keep going around in their Mercedes S class.
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Nobody can even touch them.
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And it is surprising that all of this
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is transpiring in the national capital and the government is a silent spectator.
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A lot of people still feel Modi is back and
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with him everything is possible.
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I do not have any hope but I hope I am wrong.
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And the government steps in
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says enough is enough, you cannot play with common man's rights.
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And you will have to pay for the wrongdoing.
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That would be a lesson to the builders that you cannot scam people.
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You tell me if you liked the episode.
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If it was a little too serious, next time I will get Bhakt Banerjee.
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Like, dislike, share, comment.
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And if you want to support the Deshbhakt
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patreon.com/akashbanerjee is the link
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Go there and support us
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If you are an international donor, paypal is the option.
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If you want to make a one time donation in India, then there is instamojo
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Thanks for watching.
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I would be back soon with such episodes.
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