TATA Housing Project

On 26^th May 2010, under former President Mohamed Nasheed’s administration a housing project was signed between the Government of Maldives and Karagwal 18SG Developers Pvt Ltd. However, the agreement was shortly amended so that the project was handed over to Apex Realty Pvt Ltd, a joint venture between the Indian mega conglomerate subsidiary TATA Housing Development Company Pvt Ltd and Karagwal 18SG Developers Pvt Ltd, chaired and managed by Indian royalty Sri Atrey Sanyogita.

Under this project the company was initially tasked with the construction on 500 social housing units in two phases. In the first phase of the project 350 social housing units would be constructed and the remaining 150 units in the second phase of the project. However, according to state audit documents, the proposal was illegally amended to include an additional 55 units raising the total housing units to 555.

According to the agreement, the Government of Maldives will purchase the social housing units from the contractor at a rate of $ 72,500.00 per unit. Additionally, the Government of Maldives will also hand over two prime locations (Old Nadhee building plot and Odeon land plot) to the contractor to develop luxury housing units and sell at a price they deem fit along with the handover of Lh.Lhosalafushi to develop and operate a resort for 50 years without any land rent.

Absurd benefits for a simple housing project

Under this project the contractor was entitled to

• Sale of the 288 housing units at Malé Grand and Malé Square at a rate of $72,500.00 per unit, bringing the total revenue to the contractor from the sale of the units to MVR 321,969,600.00
• Ground and First floors of the 4 land plots without any rents and the right to profit from renting the commercial areas.
• 117 housing units developed under the first phase of the project would be sold at a price decided by the contractor.
• Odeon and old Nadhee building land plots would be handed over to the contractor to develop both social and luxury housing units and sold at a price solely determined by the contractor.
• Contractor will be entitled to receive Lh.Lhosalafushi to develop a 35 luxury villa resort island and operate it for 50 years without any land rent.
• Zero import duty for all material imported under this project.

Red flags

According to the audit report made in 2010, several red flags were raised from the onset on the agreement. The report noted that the agreement explicitly stated that the Government of Maldives should pay the contractor 20.13% price of the agreed amount at which the Government of Maldives would purchase the housing units. The audit report noted that at the time, this clause was against the competitive public bidding process of the government.

Moreover, according to publicly available data from the Government of India, TATA’s partner company and the original winner of the bid 18SG Developer Pvt LTD’s parent company SG18 realty was formed less than 6 months before they won the contract on 30^th September 2019. And within 5 months’ time the company formed a joint venture with TATA Housing and landed a multi-million-dollar contract in the Maldives.

According to the Ministry of Economic Development, Apex Realty is owned by TATA Housing, SG18 Developers Pvt Ltd and its Chairman and Managing Director Sri Atrey Sanyogita. While TATA Housing has credibility and technical experience, it remains to be seen in how exactly a newly formed company managed to form a joint venture with an industrial giant and secure a multi-million-dollar contract all within the span of five months.

2012-2018: Change in administration and another chance at completing the project

Following President Mohamed Nasheed’s resignation and change of administration, the project went into hiatus with no progress throughout President Dr. Mohamed Waheed’s administration. After repeated negotiations, the Government of Maldives revoked the rights to the Odeon and Naadhee land plots.

However, President Abdulla Yameen restarted negotiations and in 2014 the agreement was amended. Under the new terms on 30^th October 2014 the Odeon and old Naadhee land plots were once again handed back over to the contractor and the Malé Grand and Malé Square housing units was scheduled to be completed within 12 months. Amendments were also made to allow the company to develop and operate Lh.Lhosalafushi once they completed the whole project.

However, the contractor yet again failed to complete the project even when terms of the agreement were once again amended to give them an opportunity to once again to complete the project.

Arbitration

In the original agreement, in the event of a dispute the issue would be settled through a Maldivian court. However, the terms were amended just prior to the signing of the agreement, in 2010 to allow the contractor to submit the case at the Mumbai Arbitration Center in the event of a dispute.

However, the terms were once again amended under President Abdulla Yameen’s administration to settle the case at the Singapore Arbitration Center. However, since the contractor filed the case at the Mumbai Arbitration Center, they agreed to release their hold over the Odeon land plot.

Indian Land grab

Last week headlines were made when reports of the Contractor seeking $200 million as compensation for the Odeon and Old Naadhee land plots, were leaked. Public outcry was targeted at the contractor as both the lands has been vacant and left for the forces of nature since 2010.

The outcry changed into outrage when the Government of Maldives announced that it would be going into a settlement with the contractor. Under the settlement agreement the Government of Maldives would hand back the Odeon and Old Naadhee building land plots and sell an additional 360,000 sqft land at a price of $25 per sqft to the contractor to develop luxury housing unit.

While they are yet to announce exactly where the 360,000 sqft land would be given to the contractor, due to the obvious lack of space it is assumed that it would be in the Hulhumale phase 2.

Problem arises once again as this would mean that the contractor would be entitled to 360,000sqft of prime real estate for MVR385.5 per sqft. Due to the lack of space land prices are highly inflated in the capital city area of the Maldives with prices ranging from MVR8000-17000 per sqft. Even at the lower end this would mean that the contractor would be buying the land 95.18% lower than the market price.

Another point of concern is the question of what exact compensation that the contractor is seeking. Undeniable fact is that the contractor had repeatedly failed to uphold the terms of the agreement and finish the construction of the housing units in the past 12 years. During the same period foreign contractors have managed to launch and finish over 7,000 housing units in the Maldives. The question of why Apex Realty could not finish the agreement or on what basis they are claiming $200 million is yet to be answered.

A little light on the subject may be shed on the comments form Ratan Tata in 2017. The billionaire Ratan Tata is reported by the Indian media to have told the Government of Maldives to give them compensation “like they did it with GMR”.

This gives credence to the public’s allegations that the land grab is just another part of the Indian government’s policy of influencing domestic policies by leveraging and creating debt to their private firms.

India is a country where the boundary between the government and the private sector remains blurred. This was seen in 2018 when Indian defense analysts stated that India should have stationed their military at the Velana International Airport disguised as civilians, to protect their interests and that of GMR’s.

Similarly, in this case the Government of India has taken advantage of the current administration’s “India first” policy and allowed India to grab the scarce land from the Maldives while the Government of Maldives is set to lose at least MVR2.8 billion as TATA backed Apex Realty wins three land plots without essentially laying a single brick.