x Abu Dhabi, UAE Friday 21 July 2017

India escalates Games row by fining Emaar

The Indian government intends to penalise Emaar-MGF for alleged deficiencies in the construction of the Commonwealth Games Village.

Problems plagued India’s preparation for the Commonwealth Games, including unsanitary quarters and construction delays.
Problems plagued India’s preparation for the Commonwealth Games, including unsanitary quarters and construction delays.

The Indian government intends to penalise Emaar-MGF for alleged deficiencies in the construction of the Commonwealth Games Village, escalating the blame game that has marred the controversial project since its opening last month.

The Delhi Development Authority (DDA) said yesterday it would seek to collect at least a portion of the Dh152 million (US$41.38m) Emaar-MGF put down as a deposit before building the 34 apartment towers.

The DDA cited construction defects and missed deadlines for pursuing a financial judgement.

"There was a penalty clause for not adhering to timeline and we have written to [the Indian federal urban development] ministry that we are going to penalise [Emaar-MGF] for that," a spokeswoman said.

She said the ministry indicated it supported the move. "They have said that this is the right direction," the spokeswoman said.

Emaar-MGF is a joint venture between Dubai's Emaar Properties and India's MGF Development. The company has steadfastly maintained that it met all deadlines and corrected any deficiencies that were pointed out.

The 1,100-plus flats in the village housed athletes from 71 countries but opened after the wettest monsoon in 30 years. Athletes complained of filthy living conditions, shoddy plumbing, broken elevators and flooded basements.

On October 16, two days after the games ended, the DDA sent a letter to Emaar-MGF alleging as many as 13 defects in the village, said a senior official from the office of Tejendra Khanna, Delhi's lieutenant governor who is also the chairman of the DDA.

The letter, drafted after a "high level inspection" of the village by DDA's engineers the previous day, claimed there were a range of structural deficiencies and poor amenities in the village, including faulty plumbing, sub-standard water-proofing of the roof that caused seepage in apartments and poor quality bathroom tiles.

Anupama Chopra, a spokeswoman for Emaar-MGF in New Delhi, could not immediately confirm if it had received the letter. She said the company had not received any information from the DDA related to the bank guarantee, calling such suggestions "media speculation".

Emaar-MGF said on Wednesday the village "received rave reviews from all participants who stayed there". It also said "all project milestones were achieved" and that the reported problems were due to poor maintenance by the games operating committee.

The Commonwealth Games, which began with a $450m budget, ended up with a bloated $6.6 billion price tag for the government and it is eager to deflect the blame.

DDA is being investigated by India's central vigilance commission, an anti-corruption watchdog, for alleged misappropriation of funds.

Emaar's investment in Emaar-MGF is less than 1 per cent of its market capitalisation, said Majed Azzam, an analyst with Al Futtaim HC Securities in Dubai.

The controversy, however, is causing Emaar's brand "massive reputational damage" in India, where it has hopes of expanding, he added.

Emaar-MGF has filed for an initial public offering that values the company at about $3.5bn, said Mr Azzam, down from $15bn when it first planned to sell shares two years ago.

The parent company's shares lost 1 per cent in Dubai yesterday to close at Dh3.85.

Under Emaar-MGF's contract for the project, the flats will eventually be returned to the developer, refurbished and handed over to customers who bought them as homes.

Emaar-MGF also sold 333 apartments to the DDA, which some Indian media dubbed a "bailout" for the developer. Emaar-MGF said it sold the units below market price and had not yet been paid the full amount it was owed.

It also said it had offered to buy back the apartments.

* with Reuters

breagan@thenational.ae