In a brief prepared by the DDA, for perusal during its recently-held authority meeting with the Lieutenant Governor on June 3, the DDA said it considered five options before deciding to purchase 333 flats from Emaar-MGF. “The DDA weighed the pros and cons in the event of the project developer failing to sustain the pace of work,” the brief said. Two of the options it lists are, “To file a legal suit for specific performance against the project developer,” and “to revoke the Project Development Agreement, forfeit the upfront fee of Rs 321 crore given by the Project Developer, invoke the performance guarantee of Rs 300 crore and find a new developer to complete the project.”

Both options were quickly shelved by the DDA because it was felt that “the chances of getting the project completed on time were remote.”

If taken to court, Emaar-MGF could have pleaded that due to ongoing cases in the Supreme Court on the environmental concerns over the project, they were finding it difficult to attract prospective buyers.

The DDA said that when the project was granted, only two developers had submitted their bids - Emaar-MGF and DLF.

Emaar-MGF was the only developer that qualified and hence the possibility of finding another developer with barely a year-and-a-half left for the Games was a difficult task.

The DDA also considered whether it would “terminate the agreement and develop the project by itself.” This too was considered unviable as the DDA would have to give the project developer one month notice after the date of the fourth milestone, July 30, 2009.

“DDA would have been left with no time to execute the project on its own as calling for fresh tenders would have taken a lot of time and it would have been impossible to complete the remaining work by the deadline of March 31, 2010,” the brief says.

Perhaps the most astonishing option considered by the DDA was “to revoke the Project Development Agreement and find alternate venues for accommodating the participants.”

The brief says that this option too was considered unviable because it was only due to the “severe dearth of hotels in Delhi and NCR,” that the project was being developed in the first place.

Mode of financing

Once the decision was made to bail out Emaar-MGF, the DDA considered whether it should give a loan to the troubled developer instead of purchasing the flats. There was, however, a unanimous decision against providing loans because, “there was no security that the project developer could provide, as the land already belonged to the DDA and repayment of the debt and interest by Emaar-MGF was considered doubtful.”

The DDA was also of the opinion that if given a loan, Emaar-MGF could decide not to push the sales of the apartments till a more opportune moment in the realty market.

This would, in turn, delay the repayment of the loan. That was when DDA decided to purchase the flats and set up a price-fixation committee to decide the rates.

The final price

As reported by this newspaper on May 6, the four- member price fixation committee in its report recommended that the flats ought to be purchased at a price anywhere between Rs 9,382 and Rs 9,720 per sq. ft. On May 11, the DDA announced that it would purchase 333 flats from Emaar at the rate of Rs 11,000 per sq ft. According to the brief submitted by the DDA, the Vice-Chairman of DDA, A K Nigam, set up a three-member negotiation committee to consider the price fixation committee’s report and negotiate a final price with the developer.

The negotiation committee, headed by Nand Lal, finance member, DDA, concluded “that the Project Developer’s margin and the cost of parking had not been considered by the price fixation committee,” and hence raised the final price to Rs 11,000 sq.ft.

DDA released the first installment of Rs 200 crore to Emaar-MGF on May 6 and has linked the future installments to completion of the project.

* 2nd installment of Rs 150 crore on or before June 15, 2009

* 3rd installment of Rs 150 crore on or before July 31, 2009

* 4th installment of Rs 150 crore on or before September 30, 2009

* 5th installment of Rs 116.89 crore on or before November 30, 2009