NEW DELHI: Property portal IndiaHomes. com has suspended operations of its primary new apartment sale business due to multiple issues, including being in violation of one of the conditions set in the new ecommerce marketplace rules as it offers discounts to buyers on homes from the commissions paid by builders, thereby influencing the final sale price, said two people with knowledge of the development.
The portal has been facing issues in recovering receivables of around Rs 100 crore from builders for the last two years because of a slow market and its investors have also shown concern about new provisions in the real estate regulatory bill that brings in criminal liability on part of brokers.
“The investors in the company—NEA, Foundation Capital and Helion Ventures-—have decided not to put in more money in the company,” said one of the people quoted above. “They are now in the process of selling their combined 87% stake in the remaining company to Mauritius-based fund Pinnacle Capital for Rs 240-250 crore, recovering the amount invested by them so far in the business while founder Samarjit Singh will continue to hold his 13% stake in the company,” he said, asking not to be named.
“The new investor is buying the company without taking on any employee liability from the division that has been closed, though it will get rights on the Rs 100 crore pending receivables of that division,” he added.
The remaining company includes its secondary services group, which provides sales leads to brokers and builders and its business associates venture, which will continue to run alongside its international arm, UKbased property advisory firm Unesta, acquired in 2014.
Email questionnaires sent by ETto Helion Ventures, Nexus Venture Partners, Foundation Capital and Pinnacle Capital did not elicit any response. Samarjit Singh said: “As a matter of policy, I can’t comment on such market speculation”.
In an opinion that it has sought from law firm OP Khaitan & Co, IndiaHomes has been told the company follows a marketplace model of ecommerce under the new guidelines that the government has recently notified and is therefore allowed 100% FDI under the automatic route. However, it is in contravention of one of the 10 conditions laid out under the FDI guidelines, which says that ecommerce companies with a marketplace model will not influence, directly or indirectly, the sale price of goods or services that they sell.
“IndiaHomes, however, offers discounts to buyers on homes of developers they sell on the site. This discount is given from the commissions the company gets from developers. The view is that by doing this they indirectly influence final sale price of a home, which violates the FDI condition,” said the second person.
Investors in the company are also concerned about the new real estate regulatory bill, which mandates registration by agents before they are allowed to sell homes in new projects and also allows for imprisonment of up to a year for failing to comply with the directions of appellate tribunal.
While investor NEA had put in $17 million into IndiaHomes over multiple funding rounds, Foundation Capital put in $11million and Helion Ventures put in around $8 million, taking total investments by the three to around $36 million.
IndiaHomes was also in talks with another property portal Housing.com for a merger but talks fell through recently.