EMAAR-MGF SCAM

SIDHARTH G U P TA 50-MBA-13

Overview.
Emaar Scam came to light in 2011 when petition was filed by Congress MLA P Shankar Rao against B P Acharya, Emaar Properties, Emaar-MGF Land Pvt. Ltd. , Directors of Stylish Homes Real Estate Pvt. Ltd. and charged them with criminal conspiracy, cheating, criminal breach of trust, showing forged documents as genuine under the Prevention of Corruption Act. APIIC ,an andhra pradesh govt. undertaking, was cheated and total loss incurred because of emaar scam is about 2500 crore ($380 Million).

Emaar Properties
A Public Joint Stock Company(PJSC) Incorporated in June 23 ,1997. Emaar went International in the year 2004 ,and same year entered the Indian market .

World's leading real estate company by developing approximately 89 million square feet of real estate across all segments and with operations in 14 countries spanning the Middle East, North Africa, Asia and Europe.
Emaar is well known for Burj Khalifa , Dubai Mall etc.

Emaar-MGF
MGF Ltd. Are well known Mall Builders of India, incepted with Emaar in 2005 and has many ongoing residential projects in Delhi (particularly Gurgaon), Mohali, Chennai, Hyderabad, and other key Indian State Capitals/Cities India is one of the key international markets of Emaar Properties, thus its joint venture with MGF Developments Limited of India is rolling out the Countrys largest foreign direct investment in the real estate sector.
Emaar MGF came to spotlight for Indian masses and critics by completing the famous Common Wealth Games Village before schedule and meeting international standards.

APIIC
Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was incorporated on 26th September, 1973 for providing infrastructure through development of industrial areas

APIIC is a fully owned Undertaking of Government of Andhra Pradesh and any land / area earmarked for development by the govt. goes to APIIC.
The Corporation has most of its active projects in the Public-Private Partnership Mode

The Deal
In 2003, Dubai-based real estate giant Emaar Properties formed a joint venture with the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) which came to be known as EHTPL( Emaar Hills Township Private Limited). The plan was to build a high-end township on 535 acres in Gachibowli in which partnership granted 76% equity to Emaar and 24% to APIIC. In addition to a number of luxury villas, plan also included a golf course and a hotel.

WHAT HAPPENED

PROBLEM

PHASE I : In 2006, EMAAR brought Emaar-MGF as a As per norms and agreement between co-developer in the deal without APIIC and Emaar Properties, EMAAR was knowledge or concent of APIIC. solely given the development project and no other company can enter as codeveloper.

PHASE II : EMAAR went into agency agreement with Stylish Homes Pvt. Ltd. to sell villas on behalf of EHTPL, entitled for 4% of sale value (commission) ,still it was not consulted with APIIC. As APIIC was the owner of the land, it is illegal for EMAAR to entitle Stylish Homes Pvt. Ltd. with selling of villas without consent of APIIC.

WHAT HAPPENED

PROBLEM

PHASE III : Stylish Homes Pvt. Ltd. sold villas at undervalued price of 5,000 per sq. yard on papers but in reality , they sold at 25,000 to 50,000 per sq. yard. The actual market price was 50,000 per sq. yard and they showed the documented price as 5,000 per sq. yard. So they sold the villas at very cheap price ,legally.

Effect Of Scam
Original Stakes
6.3% EMAAR 26% 74%
24.7%

Final Stakes

EMAAR APIIC 69%

APIIC EmaarMGF

Continue
As the documented rate at which villas are sold by Stylish Homes Pvt. Ltd. were already low , only 10 % of actual market value, the Phase I further reduced the stakes from 26 to mere 6.3 % .

With this, the APIIC is deprived of its due share in the revenue generated by the sale of villa plots.
Thus total loss incurred by APIIC and Andhra Pradesh Govt. is about $380 Million.

People Arrested
B P ACHARYA Senior IAS Officer Former Managing Director, APIIC Fired from his earlier post and arrested on 30th January 2012 but then released due to medical sickness and admitted to hospital

Koneru Rajendra Prasad Chairman, Timex Group Prasad is alleged to have spirited away huge sums of money from India to bank accounts abroad. Arrested by the CBI on November 3 2012 in Hyderabad

Tummala Ranga Rao Director, Stylish Homes Pvt. Ltd. Arrested but given anticipatory bail for cooperation with the CBI in the investigation

Sunil Kumar Reddy Arrested on 24th January 2012 by CBI

Money Cant Buy Happiness