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Commentary

Omaxe Axing Projects, Owners Furious

Praveen Singh at the Indian Express on property developer Omaxe’s Execution Failure:

PM Senthil Kumar, a Delhi-based executive, booked a flat in Omaxe’s project called Galaxy in Sector 112, Noida. Since 2007, he has already paid over Rs 10 lakh to the developer. However, when work on the project did not start even two years after its launch, Kumar applied for a refund. He says he had booked the flat not because he wanted to speculate in property, but because he needed a place to live in.

Kumar says Omaxe has shattered his dream of owning a house. “I have visited their office and requested for refund with interest. They are not agreeing to this. They also say that they will not refund the money before December 2009. And even then they will only refund the principal. It means that my money is stuck with them for more that two-and-a-half years.” He said when he enquired with the developer about the project, he was informed that the New Okhla Industrial Development Authority (Noida) had not given them possession of the land for this project till date because of a compensation-related issue with farmers. “How can a developer book flats without even owning the land? Isn’t this a fraud?” asks Kumar.

I’d written earlier about under-construction properties being a royal pain to purchase. The Indian express article highlights nearly all the problems one could face:

  • Making a deal without even owning the land on which the apartment will be built.
  • Untenable delays. In one case of a scrapped project 125 buyers were hoodwinked into buying even before the land was acquired.
  • Delayed refunds and loss of interest
  • Over promise, under deliver – Omaxe promised 10 lakh “affordable” homes and has yet to deliver on one. In other projects, they “handed over” control to residents without completing basic amenities.
  • No “completion certificate” for a project, which is critical for getting other approvals like water/sewage connections.

I have family living in one project mentioned – Omaxe Nile on Sohna Road – where it’s true that Omaxe hasn’t provided full project reports on the water, electricity etc. Sewerage is handled through trucks which ply in and out every day – the connection to the city system is not done. (Though they have taken a “deposit” for it!) In a recent storm, the 8×8 foot window frames in many houses caved in; they weren’t glued properly. Omaxe randomly added square footage to the project before registration – there was just no way to verify. They’ve not yet handed over the documents to the RWA, contrary to the article’s note – and that’s because they’ve not given enough documentation for a handover to take place.

Even where I live, Park View City on Sohna Road, the developer has delayed construction of a gymnasium though we’re nearly at 80% occupancy. But things are dramatically improving here now – as they are in the Nile – as the residents take control. In the time we have been here, in both the Nile and PVC, swimming pools have come up, parking has been streamlined, maintenance has been perked up, security procedures set in place etc. ; all the hard work has been done by the residents, even though they have to pay very hefty monthly charges (upwards of 3k a month per apartment) to the builder!

There’s little wonder why I will never recommend under-construction properties. You don’t want this kind of hassle. At least when you buy a ready property you can bypass the mudslinging between the early adopters and the builder; you get to examine what you will eventually live in; and the early problems will have been sorted out. The prices may not be very different (they’ve not gone up in the last 12 months) though this will depend on the stage of the market.

Omaxe’s share price, at Rs. 123.15, is near a one year high of 130. It’s recovered a lot from the lows of Rs. 40, but way below the all time highs of Rs. 600. The builder’s just gone through a ratings downgrade from Fitch (which means nothing; Fitch reacted WAY after everyone knew there was a problem, look at the stock price).

Omaxe Axing Projects, Owners Furious

(Click for a larger picture)

Profits crashed to 9.78 cr. last quarter from 46.52 in Q1 2008. Their consolidated EPS for FY 2009 was 2.38, and for the trailing 12 months is a negative Rs. 1.02. Does the stock deserve a ridiculous premium? We must ask the God of Land Bank Valuations.

  • Anonymous says:

    >all what has been written about Omaxe is absolutely wrong. the journalist who had done this story did not have correct facts and figures and i would request you all to not to go by what all has been written in Indian express.

    Indian express being a reputed publication has made an attempt to tarnish the image of the company for the reasons they only know.

    rest assured, omaxe has not done any cheating with you and for any clarification, you may contact omaxe officials.

  • Anonymous says:

    >You have a good blog. I am manly a short term trader on the NSE. I have had some success although I am still learning.

    I also live in Park View City 1, and it seems things are improving. The club is almost complete. But, the maintenance people need to be given a good kick up the back side. Their plumbers, electricians take days to respond to calls. My servant recently had to call 30 times for a plumber in 4 days as there was leakage from above. Then they came and fixed it!

  • Deepak Shenoy says:

    >Anon2: We should talk – esp. if we are in the same building! (mail: deepakshenoy at gmail )

    And yes, having the same issues with plumbers and the like.

  • Piyush says:

    >The article reflects the agony lots of us are going through just because we trusted Omaxe.
    Omaxe is trying to keep the money for as long as possible without paying any interest. They had clear intentions of cheating right from the beginning as they kept telling the customers that the project is being delayed due to Noida Authorities while they did not even have the required approvals.

    I would urge all readers to spread the word so that no one else gets trapped by Omaxe.

  • Anonymous says:

    >I am in a similar situation.I paid 33 lakh rupees for Omaxe North Avenue 3 Bedrrom flat 602 ib Rosewood Tower. The project was shelved, the tower is not being built and Omaxe have taken my 33 lakh rupees and now refuse to hand back the money. They do not respond to phone calls, neither do they respond to emails or letters. I am not sure if a legal case is the best way. I think Omaxe being in business where faith is vital would be susceptible to publicity of this scandal.I am not alone , there are hundreds of other people who invested in Omaxe North Avenue II at bahadurgarh.I am starting a group, my email is sajidmuzaffar@yahoo.co.in and people in similar situation as me need to get a group together so that we decide what to do. We can have a common legal representataive to deal with company on our behalf and if need be we can go to court and publicise the fradulaent practice of Omaxe and prevent others from being defrauded by OMaxe.

  • S K Malik says:

    >Omaxe has cheated at Bahadurgarh project also.

    For detail you can read

    BLOG omaxebahadurgarh(DOT)blogspot(DOT)com/

    I booked three BHKs flat three years back and paid 20 % cost.
    No construction started. No refund.

    Now Omaxe compelling to shift in other project or forefit the 20 % booking amount. Day light robery.