The elusive Sports Cities of Noida - The Probe

The elusive Sports Cities of Noida

Since the last ten years none of the envisioned Sports Cities have been built. That apart, flouting of rules and widespread corruption in the allotment of plots for construction of Sports Cities have ultimately resulted in a loss to the exchequer and in many cases have also affected Noida homebuyers.

Photo courtesy: lotusgreens.in

In its first Performance Audit Report on the functioning of the Noida Authority, the Comptroller and Auditor General (CAG) has pointed out that there have been flaws in the tendering process and financially inadequate and ambiguous criteria were followed in the allotment of large plots of land (125 to 325 acres) in prime sectors in Noida for developing world-class sports infrastructure facilities. This has led to the selection of incompetent consortiums with weak financial capabilities that have failed to enforce the terms and conditions of the schemes. The lack of a monitoring mechanism related to the projects has resulted in non-existent sports infrastructure in the region for over a decade now.

825 acres of the prime land grabbed in the name of development of Sports Infrastructure

With a vision to hold international sporting events like the Commonwealth Games and Asian games in Noida City, the Noida Authority allotted 4 Sports City plots admeasuring 33,44,193 sqm (826.34 acres) of land in prime sectors of Noida from May 2011-July 2015 at the lease premium of Rs 5597.92 crores to a consortium of 6 Members led by a Software Company Logix Soft Tel Pvt Ltd of the Logix group in May 2011, a consortium of 9 members led by Xanadu Pvt Ltd of 3C group in May 2011, a consortium of 7 members led by the Lotus Green Developers Pvt Ltd of 3C Group in September 2014 and a consortium of 10 members led by ATS Home Pvt Ltd in July 2015. The allotment was made based on competitive bidding against a reserve price (RP) fixed by the Authority.

The Sport City schemes envisaged that the allottees would construct world-class integrated sports infrastructure and recreational facilities in 70% of the plot, and the remaining 30% plot area would be used for residential and commercial projects.

The Allottees were required to spend a minimum amount of Rs 410 crores on the creation of sports infrastructure facilities in the first three Sport City plots. The exact fund to be spent on constructing the international level cricket stadium with a seating arrangement for 50,000 spectators and adequate parking facilities (in 35 acres) and other sports infrastructure in 70 per cent of the fourth plot was not explicitly mentioned in the brochure of the scheme. The Authority also allowed the allottees to use the unutilised FAR and Ground Coverage (GC) of 70 per cent sports area in the residential/commercial projects with no limitations on the height of the buildings. The Sport City plots were allotted at highly subsidised rates to the allottees to compensate them for the development of integrated sports infrastructure facilities on the plot.

Pic courtesy: Noida Authority | Twitter

Accordingly, the lease deeds executed by the Noida Authority with the allottees of the three plots, provided that the lessees will spend Rs 410 crore on the integrated sports infrastructure, viz. Rs 40 crore on nine-hole golf course, Rs 50 crores on swimming centre, Rs 50 crores on cricket academy, Rs 35 crore on tennis centre, Rs 30 crores on indoor multi-purpose halls for gymnastics, volleyball, basketball, badminton, squash, rock climbing, Rs 10 crores on multi-purpose play field, Rs 65 crores on IT centre, administrative centre and media centre and Rs 100 crore on other miscellaneous items and complete the entire sports infrastructure within five years from the date of execution of deeds.

In the fourth plot, the lessee (ATS) was required to construct an international level cricket stadium along with a sitting arrangement for 50,000 spectators with adequate parking facilities in three years and complete other sports infrastructure & institutional facilities in five years from the date of execution of the deed. The residential and commercial projects in the remaining 30% plot were expected to be completed in phases in seven years. The terms and conditions prescribed in brochures of the schemes permitted sub-division of the plots meant for residential and commercial use, i.e. within 30% of the Sport City plots only.

Allotment of large plots of Sports Cities to ineligible applicants and consortiums

The C&AG has found that the plots for Sports Cities were allotted to ineligible consortiums that did not fulfil the technical eligibility criterion relating to net worth and turnover from real estate development and construction activities in the last three years. Many did not even fulfil other criteria like the experience of having completed two real estate development projects of 10 lakh sq ft in the previous five years duly certified by the competent statutory authority.

The C&AG further stated that the Authority also kept flawed and ambiguous terms and conditions in the brochures of the schemes, which enabled the allottees to use the credentials of either a holding company or subsidiary companies without their actual participation to garner plots beyond their net worth. As a consequence, the actual allottees lacked the capability to execute the projects themselves and divided the plots into numerous sub-plots and sold them to third parties.

Real estate in Noida | Pic courtesy: The Probe

Seven members of consortium incorporated as a company on March 10, 2011

Plot no SC-01/78-79 was allotted to a 9 member consortium led by Xanadu Estate Pvt Ltd, 3C Group Company in May 2011. Seven out of nine members, including the lead member, were newly incorporated subsidiaries of Three C Universal Developers Pvt Ltd with no turnover from real estate activities in the last three years. They did not have any resources to pool for taking the plot as a consortium, thereby negating the very purpose of constituting a consortium.

The other two members, Meriton Infradevelopers Pvt Ltd and Sutlej Agro Products Ltd, were either newly incorporated or had negligible turnover from real estate activities. The eligibility was considered based on the credentials of Three C Universal Developers Pvt Ltd as a holding company of one of the members Xanadu Estate Pvt Ltd. Further, the MoA of the consortium didn’t specify the role and responsibilities of each member as required in the scheme brochure.

In utter disregard of the terms and conditions, an existing company Three C Green Developers Pvt Ltd was approved as SPC even though it was incorporated on December 30, 2010, before the allotment of the plot against the conditions laid down in the brochure. Further, only four members had the shareholding in the SPC against nine members in the consortium. Thus, the SPC of the Consortium had contravened several mandatory terms and conditions of the brochure apparently with the tacit approval of the senior officials of the Authority.

None of the members of the consortium had any turnover from real estate activities

It has been found that the allottee of plot SC-01/150 was the six member consortium led by a software company Logix Soft Tel Pvt Ltd. In this consortium, none of the members, including the lead member, had any turnover from real estate development and construction activities in the last three years. Further, the auditors found that the applicant failed to fulfil the mandatory criteria of submission of a certificate from the competent authority for 10 lakh sq ft. Therefore, the consortium was not qualified as per the scheme brochure’s mandatory eligibility criteria, and their bid should have been outrightly rejected. Further, the key members of the consortium on whose credentials the plot was allotted exited the consortium after allotment, and the ownership was passed on to third parties in flagrant violations of the term and conditions of the brochure.

Char Murthy Chowk at Greater Noida West | Pic courtesy: The Probe

Eight out of ten members of the consortium did not have any turnover in the last three years

As far as the allotment for the development of an International level cricket stadium cum Sports City to the ten-member consortium led by ATS Homes Pvt Ltd is concerned, the C&AG has stated that the successful bidder did not fulfil the eligibility criteria as the turnover of one relevant member (ATS Infrastructure Limited) and its two subsidiary companies (ATS Estates Pvt Ltd and Gul Properties Pvt Ltd) was considered, which tantamounts to providing backdoor entry to the applicant on the basis of credentials of those subsidiaries who are not part of the consortium. Further, out of ten members of the consortium, eight members (including the lead member) did not have any turnover during the period 2012-13 to 2014-15, and the net worth of the lead member was negative. Further, two completed projects of the relevant member were shown for Rs 308.67 crore, which was not supported by its accounts for the year 2013-14, which showed a negative turnover.

It would therefore be evident that all allottees used the veil of the consortium of 6-10 members to grab the plots but used the credentials of 1-3 members and their holding/subsidiary company to qualify the eligibility criteria. After allotment of the plot, key members of the consortium left or were left out. Noida Authority allowed the allottees to violate most of the terms and conditions they themselves had prescribed in the brochures, leading to the non-achievement of the prime objective of the Sport City schemes even after a decade.

New Okhla Industrial Development Authority office premises | Pic courtesy: The Probe

The C&AG also found that in utter disregard for the terms and conditions of the schemes, the Authority allowed the subdivision of the entire plot (826 acres) of the four Sports City projects into 81 sub-plots, thereby destroying the entire concept of development of integrated Sports City. The sub-division of a plot was initially permitted in September 2012 and later on followed in a routine fashion.

The 578 acres of land earmarked for sports infrastructure in four Sports Cities were too sub-divided into 34 subplots, thereby making the objectives of Integrated Sports infrastructure like a nine-hole golf course in three Sports Cities in sectors 78, 79 and 150, international cricket stadium in sector 152, unachievable.

The work on the cricket stadium has not even commenced though it was to be completed by the end of 2018. As a result, none of the envisaged sports infrastructures in any Sport City plot has been completed though more than a decade has passed since the first two plots were awarded.

No accountability fixed

The allottees were mandated to spend Rs 1640 crores on sports infrastructure in 5 years but spent practically nothing on sports infrastructure facilities in the last ten years. However, none of the envisaged sports infrastructure projects, including institutional and other facilities, have been completed. The C&AG has also pointed out that the scheme for Sports Cities was launched by the Noida Authority without requisite approvals from NCRPB and the Government of UP.

It was also found that the plots for Sports Cities were allotted without preliminary consultation with sports bodies like BCCI and SAI, without fixing and prescribing the technical specifications required for different sporting activities. Therefore, it was no wonder that none of the envisioned sports infrastructures has been completed in the last ten years.

Real estate in Noida | Pic courtesy: The Probe

RERA failed to protect the interests of home-buyers

Section 4 (2) (l) of the Real Estate (Regulation and Development) Act 2016 enjoins upon all promoters to submit an affidavit along with their application for registration of the projects stating that (A) that he has a legal title to the land on which the development is proposed along with legally valid documents with authentication of such title if such land is owned by another person; (B) that the land is free from all encumbrances, or as the case may be details of the encumbrances on such land including any rights, title, interest or name of any party in or over such land along with details.

Though the brochures of each scheme for Sports City and lease and sublease deeds executed by the Noida Authority stipulated that 70 per cent area of the plot would be used for recreational, sports, institutional and other facilities, UP RERA registered more than 50 residential and commercial projects of the allottees/sub-allottees on the plots of four Sports Cities.

UP RERA office | Pic courtesy: The Probe

As most of the major sports infrastructure have not been undertaken till date and none of the 9 hole golf courses, international level cricket stadium, multi-purpose indoor sports halls, or cricket academy is likely to be completed in the near future, the homebuyers of those registered residential projects under construction are likely to face major issues in getting their flats registered even if their residential projects are completed.

Incidentally, most directors of all the four Special Purpose Companies (SPCs) have since resigned and left. The decision of the Noida Authority to approve the use of increased FAR of the entire area of the Sport City in residential and commercial projects of allottees/sub-allottees without monitoring and ensuring the construction of integrated sports infrastructure in 70% area of each Sports City project is injudicious and highly improper. It would affect the future prospects of the home buyers of these residential projects as their flats may not be registered unless envisioned integrated sports infrastructure in 70% area of each Sports City project is completed.

Significant incentives of Rs 8,643.61 crore to allottees

Further, the C&AG has determined that NOIDA Authority had given significant incentives of Rs 8,643.61 crore in terms of reduced pricing of plots and allowance of extra Floor Area Ratio (FAR) and Ground Coverage (GC) to the three real estate developers for the development of sporting infrastructure as against the payment of Rs 5598 crores made for 33, 44, 193 sqm (826 acres) of land.

Keeping in view the ongoing development of group housing projects vis-vis little progress observed in the development of sports infrastructure in these projects in the last ten years, it would be tantamount to providing the undue benefit of Rs 8,643.61 crore to these three developers. While allowing the builders to pursue group housing projects, Noida Authority abdicated its total responsibility toward the completion of the envisioned sports infrastructure.

Thus, the world-class sports infrastructure envisioned by the Board in 2007 for holding national and international sports events at Noida failed to materialise even after the allotment of 826 acres of prime land at a much-subsidised rate seven to eleven years ago. Though the main objectives of the establishment of the sports city have not been achieved, these developers appeared to have grabbed nearly 825 acres of prime land in the city at one-third of the market rate with the aid and abetment of senior officials of the Authority, putting the interests of tens of thousands of homebuyers at risk.

Further, the allottees/lessees have not fulfilled their obligations of spending Rs 410 crores on sports infrastructure and other institutional facilities. Noida Authority needs to act swiftly and cancel the allotment of the plot along with encashment of the indemnity bond, failing which these lessees/sub-lessees will continue to create third parties rights on the land/flats without fulfilling their obligation towards the Authority.

RB Sinha, a 1983 batch Indian audit and accounts service officer, is a retired DG of the C&AG of India. He was a member of RERA, Bihar, during April 2018-December, 2021. Sinha has more than 35 years of experience in financial management and audit of government accounts.

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