The Lavasa project when started in 2004 had many firsts to its credit. Modelled on the modern urbanism of live, work and play, Lavasa was the first planned hill city that too developed by a private developer. Had it been completed it would have even entitled to the tag of India’s first smart city! But there were too many dots which couldn’t be joined together which ultimately brought the entire project to the present sorry state of affairs.
With its Town Halls and cobbled lakeside promenades for shopping, entertainment and eating out, Lavasa was planned for a permanent population of 3 lakh residents and a tourist inflow envisaged at 20 lakhs per annum. If completed, Lavasa would spread over 5,000 hectares along the edges of seven hills in the Sahyadri range of the Western Ghats. Its unique selling point is its waterfront, provided by the backwaters of Warasgaon dam on the River Mose.
However, the auditors of Hindustan Construction Company (parent company of Lavasa Corporation) have a different story to tell. The auditors of HCC, Walker Chandiok & Co LLP have made some comments about the its subsidiary, Lavasa, which must raise alarm bells about the project itself. While HCC still believes that Lavasa is still a good project and with the help of an independent valuer which shows that the worth of its assets are more than its liabilities, the auditors say “…these subsidiaries are facing liquidity constraints due to which they may not be able to realise projections made as per their respective business plans.” HCC Real Estate Ltd is a subsidiary of HCC which owns 68.7% share capital of Lavasa. HCC has invested Rs 1065.65 crore in its subsidiary and stepdown subsidiary by way of equity investment and loans. Till recently, Lavasa was in talks with its lenders for strategic debt restructuring. However, following a RBI circular the process of SDR was withdrawn by the lenders. Now Lavasa and its subsidiaries are reportedly in the process of chalking out plans for revival of business and restructuring of debts with banks which will have to be presented to the lenders for approval. According to HCC, it will be done shortly.
Controversies and setbacks are not new to Lavasa and its project. Controversy started with the land acquisition for the project which however was later on amicably settled or more appropriately ‘tackled’. From 2004 till 2009 it was almost a smooth sailing for the project, However, stock market crash of 2008 and 09 upset the company’s plans to raise money from the capital market through IPO. Even big bad news for the project was in 2010 when the Union Ministry of Environment and Forests (MoEF) intervened and issued a stop-work order and notice to Lavasa Corporation. It was then told that the company had failed to obtain environmental clearance from the Union ministry. It had proceeded on the basis of a clearance from Maharashtra’s environment department. Further, an expert committee constituted by the ministry on the directions of the high court at Mumbai, had confirmed the violations of environmental laws, including haphazard cutting of hills. Apart from environment law violations, the project had to fight public interest litigations also. The project remained in abeyance for a prolonged period which pushed up its cost to such a level from where chances of the project becoming a success became remote. If the project has to be revived, all those who are involved in it – promoters, investors and lenders, have to take a haircut.
Had the project become a success it would have given an invaluable opportunity for the students to learn the art of managing land acquisition and environment laws and also the government authorities!
The Master Plan of Lavasa, developed by HOK, USA, had won 4 awards, but the promoters of the project today are struggling to convince the bankers that the project can sail through. After all, award winning designs do not necessarily guarantee project success.
Ifs and buts can’t be candy and nuts and Lavasa’s wait for Christmas seems to be perpetual.