Govt.

complicity in suspicious
Bambalapitiya land deal?

Bambalapitya flats
By C. A. Chandraprema-May 11, 2017, 9:18 pm

We have written extensively in this
newspaper about the proposed Bambalapitiya flats
redevelopment project. Despite the revelations about the lack of
financial standing of the promoter UTL Global Projects Pte Ltd to
undertake a project of this magnitude, in March this year, the
Cabinet granted approval to the National Housing Development
Authority (NHDA) to sign an agreement with City Square Projects
(Pvt) Ltd., a fully owned subsidiary of UTL Global Projects Pte Ltd
with the proviso that they had to bring USD 10 million into the
country within four to six weeks of signing the agreement. The
Bambalapitiya flats redevelopment project is an ambitious one
which seeks to demolish the present apartments and to use the
ten-acre land, on which they stand to build six towers of 36
storeys each with a total of 3,762 residential apartments along
with shops, offices and hotels.
The present residents of the flats would be given 285 apartments
and 12 shops after the completion of the project. Until the project
is completed, they would be given a monthly allowance to live in
rented houses. If financed and implemented properly, this would
be a good project. However, the promoter of the project UTL
Global Projects Pte Ltd, is a company that was incorporated in
Singapore in February 2011 and its owners are three Indian
nationals, Koorapati Premalatha Rani, Meena Pooja and Prashanth
Koorapati - all members of the same family, without any known
background in construction or real estate development or the
financial resources to be able to handle a project of this nature.
When this project was first mooted in 2014, UTL Global Projects
Pte brought in as a partner, Patel Engineering Ltd a listed
company in India, without extensive experience in real estate
development or considerable financial clout.

A tripartite MOU was signed on 29 March 2014 between UTL
Global Projects Pte Ltd, Patel Engineering Ltd and the NHDA for
this project. Subsequently, however, Patel Engineering Ltd backed
out of the project. At that point UTL Global Projects Pte Ltd
purported to bring in another Indian investor, Engineering Projects
India Ltd, a state-owned entity in India, with extensive experience
in construction and real estate and solid financial backing. UTL
Global Projects Pte Ltd and Engineering Projects India Ltd, jointly
submitted a project proposal to the BOI on 12 September 2014 to
redevelop the Bambalapitiya flats at a cost of USD 250 million
over a seven-year period. On Dec. 30, 2014 Vinoo Gopal the
Director Projects, of Engineering Projects India Ltd wrote to the
NHDA hat they were, in principle, ready to join UTL Global Projects
Pte in the project to redevelop the Bambalapitiya flats.

He also provided the NHDA with a letter from the Indian Overseas
Bank, certifying that Engineering Projects India Ltd had the
financial resources to be able to execute the USD 300 million
project if it was awarded to them.
Based on this application, on Dec. 14, 2015, the BOI wrote to UTL
Global Projects Pte Ltd that they had approved the application
they had made jointly with Engineering Projects India Ltd to
redevelop the Bambalapitiya flats. The project was also given a
15-year tax holiday. On April 19, 2016, the General Manager of
the NHDA wrote to UTL Global Projects Pte Ltd and Engineering
Projects India Ltd that the Cabinet had approved their joint project
proposal and that, in terms of BOI requirements, the two partners
in the consortium should incorporate a company in Sri Lanka as a
special project vehicle for this project.

BOI rules bent and twisted

Thereupon, a company called City Square Projects Pvt Ltd was
duly incorporated in Sri Lanka, but Engineering Projects India Ltd
was not a part of this special project vehicle – a violation of BOI
rules. City Square Projects Pvt Ltd is a fully owned subsidiary UTL
Global Projects Pte Ltd., masquerading as a joint venture with
Engineering Projects India Ltd. On June 22, 2016, a formal
agreement was entered into between the BOI and City Square
Projects Pvt Ltd. On March 05, 2016, City Square Projects Pvt Ltd
signed an agreement with Engineering Projects India Ltd. But, up
to the point of writing, Engineering Projects India Ltd does not
own any shares in City Square Projects Pvt Ltd. The agreement
states that Engineering Projects India Ltd ‘may’ purchase some
equity in City Square Projects Pvt Ltd if their board and the Indian
government agencies involved grant them permission.

The promoter UTL Global Projects Pte Ltd has not revealed to the
Sri Lankan government what exactly Engineering Projects India
Ltd has undertaken to do in terms of this agreement with City
Square Projects (Pvt) Ltd. The BOI and the NHDA granted the
approval for the project on the assumption that Engineering
Projects India Ltd had undertaken to invest USD 300 million in this
project on the strength of the letter written by the latter to the
NHDA on Dec. 20, 2014. The promoter has provided only a
redacted version of the agreement between Engineering Projects
India Ltd and City Square Projects (Pvt) Ltd to the Sri Lankan
government, claiming that the rest of it was ‘highly confidential’.
The reason why UTL Global Projects Pte Ltd is keeping the most
important parts of this agreement secret is to conceal the fact
that Engineering Projects India Ltd has not made any worthwhile
financial commitment to the project.

The redacted version of the agreement states that Engineering
Projects India Ltd will ‘endeavour’ to find a third party to provide
the working capital for the project. While this project proposal was
being evaluated by the BOI and the NHDA, there was no talk of a
still unknown and undiscovered third party who would be
providing funding for the project. Furthermore, there are many
‘IFs’ in the agreement between Engineering Projects India Ltd and
City Square Projects (Pvt) Ltd. The wording in the agreement is
such that even if Engineering Projects India Ltd gets all the
necessary clearances from the various agencies of the Indian
government, they would still invest in equity in City Square
Projects (Pvt) Ltd only at their discretion. Even if Engineering
Projects India Ltd joins City Square Projects (Pvt) Ltd it will be
playing only a limited role as per the agreement. The Sri Lankan
government has no inkling of how limited this role is because it
has not seen the full agreement entered into between these two
entities.

If however, Engineering Projects India Ltd does not get permission
from the Indian government, it will not be able to participate in
this project even in that limited way. Now that the Cabinet has
granted approval for the NHDA to sign an agreement for the
project with City Square Projects (Pvt) Ltd, the land on which the
Bambalapitiya flats stands will be transferred free of charge, on a
99-year lease to City Square Projects (Pvt) Ltd., which is wholly
owned by three Indian nationals. If Engineering Projects India Ltd
fails to join City Square Projects (Pvt) Ltd, three Indian nationals
will hold a 99-year lease on ten acres of the best land in Colombo!
Even if Engineering Projects India Ltd joins City Square Projects
(Pvt) Ltd, that too means nothing because they have undertaken
only a very limited role and the three Indian nationals who own
UTL Global Projects Pte Ltd will still be calling all the shots.

Land to be mortgaged to third parties

We have incontrovertible proof that what UTL Global Projects Pte
Ltd intends doing once they get their hands on the land is to
mortgage it to third parties. What will happen after that is
anybody’s guess. UTL Global Projects Pte Ltd has obtained a letter
from a local bank expressing its willingness to provide an
‘overdraft facility’ of USD 25 million to City Square Projects (Pvt)
Ltd for the construction of residential towers in Colombo 4. The
security that the bank will retain against the money advanced will
be a mortgage over the ‘project assets’ which is, in effect, the
Bambalapitiya land, which is to be transferred to City Square
Projects Ltd. The government has imposed the condition on City
Square Projects (Pvt) Ltd that within 4 to 6 weeks of signing the
agreement with the NHDA, they will have to bring in USD 10
million to the country. This will not be difficult because City
Square Projects (Pvt) Ltd will be able to use that very agreement
to obtain money by pledging the land as collateral.

Everything about this whole project smacks of a giant scam. The
promoter has all made misrepresentations to the BOI and the
NHDA and concealed information from the government without
revealing the exact extent of the financial commitment made by
Engineering Projects India Ltd. That can’t be the way a bona fide
property developer goes about its business. Anyone can see from
a mile away that this is not a project that is ever going to be
completed. There is still no feasibility report for the project. The
fact that the government has not shown any interest in seeing the
full agreement signed between City Square Projects (Pvt) Ltd and
Engineering Projects India Ltd indicates that powerful figures in
the government are in on the deal along with the promoter UTL
Global Projects Ltd. This is the kind of major project which should
have solid financial backing by a developer as in the case of the
Port City project, where the developer pumps in all the money and
takes the subsequent profit as his reward.

The 300 odd families living in the Bambalapitiya flats should have
the confidence that once they leave their apartments to make
way for the project, they will get their rent allowance until the
project is completed and they get their flats in the new
development. The land on which the Bambalapitiya flats stand is
a ten-acre rectangular block in a prime location, the likes of which
cannot be found anywhere else in Colombo. As things stand now,
the government is poised to give this prime land to a company
which does not have the financial clout to be able to handle a
project of this nature. This family owned company with no history
worth talking about has brought in a reputed state owned Indian
Company mainly for purposes of display. The government has
shown no interest in finding out what Engineering Projects India
Ltd has undertaken to do in relation to this project. Experience
tells us that such governmental nonchalance can only be the
result of massive kickbacks sloshing around.
Posted by Thavam