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Special Assignment

16th May 1999

A veritable swamp is all that remains of a grandiose housing scheme which never got underway, with irate clients alleging they have been duped

By Frederica Jansz

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Pay up, says UDA

UDA Chairman Nimal De Silva, told The Sunday Times that he had attempted to intervene in this 'sorry mess' and asked Richard Aluwihare early this year to reimburse with interest the monies paid to him by all those who had booked houses.

Prof. De Silva said Mr.Aluwihare has been given time till end of May to cough up the dough.

"It appears this would be unlikely as he is obviously in a financial mess," Prof. De Silva said adding the UDA is the sole authority for this project.

Countering charges by Mr. Aluwihare that the UDA failed in its obligations, Prof. De Silva said if the project had been completed the UDA would have played its part by completing the roadway and other infrastructure such as providing water, electricity and drainage.Prof. De Silva was sceptical about the company's recent terms negotiated last year with the BOI.

"I feel that Mr. Aluwihare is sinking further," he said.

ABritish Sri Lankan joint venture which embarked on a grandiose plan to build a 180 unit housing complex worth billions of rupees ten years ago, has ended up with only four completed units and one half built.

Agoda Premier Village at Peliyagoda, in the Kelaniya urban council division, promised a residential village on the lines of modern day home buildings in urban areas.

The housing complex was to be built on about 25 acres of crown land, owned by the UDA and obtained on a 99 year lease by the firm concerned - SMA Worldwide (Private) Limited.

After the lease was obtained the land had also been mortgaged to the People's Bank and Sampath Bank.

In addition the company also obtained BOI approval in August last year, which entitled them for a variety of perks that included tax concessions. Visiting the site at Peliyagoda, The Sunday Times found that nine months after the new agreement was signed with the BOI, the project yet remains at a standstill with no implementation or solution in sight for the doomed city.

The company initially obtained Rs. 9 million from Sampath bank. In addition a People's Bank bridging finance facility for Rs. 2.5 million and a People's Bank overdraft facility for Rs. 3 million amounted to a total of Rs. 14.5 million.

Further, there was an accumulated interest component of Rs. 4 million to Sampath Bank. The company had also borrowed some Rs. 4 million from the National Development Bank (NDB) to buy machinery for the project. The bank in an attempt to recover dues, proceeded with a winding-up application to recover loan and interest dues amounting to Rs. 8.5 million. The bank last year filed action in the District Courts of Colombo against the company and its Managing Director, Richard Piyasiri Aluwihare.

Mr. Aluwihare has been asked to file a reply within three months.

The People's Bank too attempted to carry out an execution for their dues by advertising the sale of the land.But Mr. Aluwihare allegedly obtained a stay order.He won because the bank had granted the mortgage on a leasehold right and not on a title deed which SMA Worldwide did not possess.

Mr. Aluwihare told The Sunday Times that People's Bank has informed him that his company was in debt of around Rs. 80 million to the bank in interest only.

Nine years ago, in December 1990, People's Bank had, to release Rs. 23 million to SMA Worldwide (Pvt) Limited, which had requested for collateral in the form of a Primary Floating Mortgage of the Leasehold Rights of the Land of the Company.

This meant that repayment to the bank would be from sale proceeds of houses. The Agreement stated that all sale proceeds of the houses would be remitted to the UDA who remit 40% of sales derived from each sale of a housing unit in the first year and 20% from sale proceeds in the 2nd and 3rd year.

Doomed from almost its very inception this housing complex remains a veritable swamp today, infested with the deadly Russels Viper (Polonga) and huge monitor lizards which stalk the area.

Irate clients who had plans of owning dream homes are furious. Many said they had paid money but were unable to obtain houses or a refund. One of the victims, an eye specialist from Kandy (who did not wish to be identified) told The Sunday Times he had paid as much as Rs. 1.5 million, seven years ago allegedly to Mr. Aluwihare, and SMA Worldwide (Private) Limited, but to date has no house.

He said the house has been built to the level of the roof, but beyond that it remains an 'empty shell'."The walls have not been plastered, the floor remains incomplete, and no connections have been secured for water and electricity.We have not been reimbursed a cent of our money, and have no house either to move into.Mr.Aluwihare always comes up with some story or another," he said.

The payment for these houses was done in four stages- 25% upon signing of the contract, 25% upon completion of the roof, 25% on completion of finishes and the final 25% on completion when handing over. A lawyer A.R. Fernando, has paid some Rs.1 .4 million as down payment for a TI type house. This house type boasts of an entry walkway, carport, internal courtyard, entry lobby, courtyard walk, living and dining, kitchen, guest closet, four bedrooms, two bedroom lobbies, two bathrooms, TV and family room, circular balcony, elevated walk, plus an annexe with a ground floor and first floor.

Despite all these attractive offers the house remains a mere apparition for its owners who say only the foundation has been laid with a ground slab. The Sunday Times learns that the entire project was initially described and sold with a concept of a swimming pool, lake, 24 hour security system, club house, super market, and in - house maintenance service.

Boasting of six types of houses, it was an advanced concept of a housing scheme and originally targeted the Sri Lankan expatriate community living abroad, Mr. Fernando said.

"If it had worked out it would have indeed been laudable and useful," he said adding it was on this basis that in 1992, though residing in Kandy, he had opted to buy a TI type house. His plan had been to rent the completed new house and use the annex each time they came to Colombo. Mr. Fernando says that initially he had refused to sign the agreement because he felt it was not worth the paper it was written on.

Mr. Fernando being a lawyer was quick to notice that the document produced by Mr. Aluwihare did not conform to certain requirements. He realised the UDA had been left out of the transaction.The UDA being prime owners of the land in question, Mr. Fernando insisted that they be included in the final agreement as the title deeds would be given over by the UDA and not SMA Worldwide.

Meanwhile Mr. Fernando was told by Mr.Aluwihare that construction work was being obstructed due to some disputes between SMA and the UDA. About two months before the general elections in 1994 Mr. Fernando had been informed by Mr.Aluwihare that he had sorted out the problems with the UDA, the terms had been re-negotiated and work on the project would get underway.

By about May 1995 the lawyer says he was given a copy of a new agreement which "appeared to be alright."

By this time the price for the house had increased slightly, but Mr. Aluwihare agreed to lend two additional perches, by increasing the block from 16 to 18 perches of land.

The buying price was now agreed at Rs. 2.9 million. These prices were for a 'carcass house' without fittings. On May 12 1995 Mr. Fernando paid over Rs. 600,000/= and two months later on July 3, an additional rupees one and a half lakhs. This amount was calculated to be a one fourth share of the total commitment. This was after the then Housing Minister Nimal Siripala de Silva had stepped in and given the go ahead for work on this site to continue.

At this stage work began on the T1 type house and the foundation was laid. Thereafter Mr. Aluwihare had allegedly requested that further down payments be made and eager that the new home be completed fast,he paid an additional Rs. seven lakhs bringing the total to over Rs. 1.4 million.

According to Mr.Fernando, Mr. Aluwihare kept telling his anxious client, that progress on the construction was slow due to problems with the UDA. Mr. Fernando said next they were informed by Mr.Aluwihare that he hoped to soon work with some foreign collaborators.Mr.Fernando says he had told him that he owed both the Sampath and People's bank ,for which no income was being generated and some sort of monetary tie-up was essential.

Mr. Fernando said Mr. Aluwihare had named some Australian, Canadian and Chinese prospectors though nothing materialized."I suppose these people were not too enamoured with his financial situation," Mr. Fernando said.

Fed up and still without a house, early this year, some six clients of SMA made an appeal to the Chairman of the UDA.

Mr. Fernando says the Chairman has since then spoken to Mr. Aluwihare and asked him to reimburse all the monies taken from customers he had promised a home to.

Mr. Aluwihare's alleged promise to do so, has yet not materialised even three months later, Mr. Fernando said.

What does Mr. Aluwihare have to say to all this? A. Pilapitiya and his wife Jennifer had made a down payment of Rs. 307,950/50 in October 1992 as a 25% advance towards the execution of a T6 type house.

The sale price for this house was Rs.1.2 million. This too was only for the carcass of a house which meant it came with no additional fittings.The deal specified that the house on completion would have no tiled floor, no toilet fittings, and no pantry cupboards. After having paid the initial down payment the Pilapitiya's were promised their dream home within a period of eight months.

On the promised date of delivery eight months later, the house could boast only of a foundation. Little did they realize at the time that seven years later their house would remain a 'mere carcass' built only to roof level and completely uninhabitable.The newly married Pilapitiya's were bitterly disappointed as their dream of moving into a new home was crushed. Explaining to Mr. Aluwihare that they had no home, it was finally agreed that they would temporarily move into a 'Show House' for three months, after which the home they had already paid a down payment for was promised.

Seven years later, the Pilapitiya's still remain in the 'Show House' which has been flooded twice.

During the last deluge that hit Colombo in April this year, the Pilapitiya's temporary residence went 3 feet under water. Victims of circumstances, they lost almost everything they had bought since getting married and setting up home.

Electrical items, and furniture were all destroyed as a result of being submerged in water, the final straw being when all the furniture in their four-year-old daughter's bedroom too went under water and was ruined.

Mrs.Pilapitiya says since moving into the temporary house, they had killed a number of russels vipers which keep slithering into corners of the residence.On yet another occasion a massive monitor lizard had made its way into their living room, she said.

Duped by the promises repeatedly made by Mr.Aluwihare, the Pilapitiya's todate have paid a sum of some Rs. 900,000/= for the home they bargained for.

A house identified as a'T5 type' was sold to Mr. & Mrs. Premlal Jayasekera. No deed has been handed over yet and the Jayasekera's live in a half built construction that has no ceiling, no peripheral walls, no internal doors and poor wiring.

Even the rain water gutters had not been fixed and Mr. Jayasekera had attended to this on his own paying an additional sum of some Rs. 10,000.

"We were forced to move in even though the house was incomplete because when you dump all your savings and have no place to go there is little choice, " he said.

The Jayasekera's have paid Rs. 1.5 million against the house that was selling for Rs. 1.7 million. In January 1993 after making the initial down payment the Jayasekera's were promised their home within eight months. They moved into the partly built house only three years later in January 1996.By this time the Jayasekera's say the entire project had come to a veritable standstill.

Considering himself lucky that he and his family have at least an incomplete home, Mr. Jayasekara said he felt that the manner in which the Agoda Premier Village had been handled was a crime against the middle class

Meanwhile Mr.Aluwihare told The Sunday Times that work at different levels had been done on 5 houses.

He said the work on an additional 19 houses was incomplete because buyers had not paid the required installments on time.

"It is entirely their fault if they do not have a home yet," he said.A resident of Britain for 40 years, Mr.Aluwihare said that in 1982 he was invited by former President R. Premadasa to come back to Sri Lanka and help build a housing complex.

Complaining bitterly against the UDA, Mr.Aluwihare maintains that the entire operation was sabotaged allegedly because of dirty politics being played at the UDA which was then chaired by R. Paskaralingam.

Mr. Aluwihare maintains that the UDA has not performed, fulfilled or honoured any of the obligations contained in the sub clauses of the deed.

Citing an example he says the UDA was obliged to hand over the site unencumbered, but that even today there are some 200 families squatting on the land.

He says the UDA also had to bear the cost of the main access road which has not yet been done. Citing another example, Mr. Aluwihare maintains that although the UDA undertook to provide the required infrastructure for the project there is still no water, electricity or drainage at the site even now. He claims that some Rs. 18 million had been borrowed from Sampath Bank for the completion of work at the site, but didn't work out because of exorbitant interest rates.

He claims he then borrowed Rs 23 million from the People's Bank on the basis that for the sale of each house the bank would receive a percentage. This too he says ended in disaster with the debt outstanding at the People's Bank being some Rs. 80 million in interest only.

Mr. Aluwihare countered accusations that he had allegedly taken money from people eager to own a home and not delivered the goods. He said although some had paid, they were without a home because they had not made the required payments at the different stages agreed upon.

"I have done nothing wrong and I am not a crook.I have been an unfortunate victim of circumstances," he said.

Asked what the present situation was, Mr. Aluwihare claims he has managed to secure foreign collaboration though he refused to name who they were.

He claimed the evaluation of the project is still in progress and that SMA Holdings Limited, received full Board Of Investment (BOI) approval in August 1998 for this project.

He says the company received BOI status by proving requirements well beyond USD 50 million.

However he admitted that the entire project was at a complete standstill. When asked whether SMA was functioning as a company, Mr. Aluwihare said he was the Managing Director,but beyond that could not name any other staff.

Clause (9) (a) in the Agreement with the BOI states that "The Enterprise shall set up and maintain an effective accounting system which shall include details relating to disbursement of capital both foreign and local including distribution of the share capital..."

BOI approval still stands

A Sunday Times investigation found that the agreement between SMA Holdings Limited and the BOI still stands with no rights, privileges being withdrawn by the BOI.

The background scenario at the time this agreement was signed between the BOI and SMA, was that two state banks had already initiated action against the same party for defaulting on payments due for this same project described in the BOI Agreement as a 'satellite city.'

To compound this further was the plight of all those who had made payments for their respective houses to be built which has remained a mirage for seven years. Mr. Aluwihare told The Sunday Times that SMA has not been able to meet its financial obligations, and the company could not proceed with the project due to a restriction in securing funds.

He said that in 1984 Grindlay's Bank, St James's Square London, which handled the banking and funding promotions of SMA International, released 600,000 sterling pounds for this project.

According to him, "the bank was compelled to freeze all facilities offered in lieu of the Project, as the UDA failed to comply with and fulfil its obligations."

BOI Chairman, Thilan Wijeinghe, defending BOI approval for this project last August, said approval was granted on the basis that an enterprise satisfied laws, regulations as well as statutory provision.

Asserting that SMA Holdings (Private) Limited submitted a valid application to the BOI he said the fact that two state banks had initiated action against SMA, was irrelevant to the BOI as it did not get involved in commercial lendings.

Many innocent individuals have even lost money on this project.

Asked if the BOI did not carry out an evaluation of the project before granting approval, Mr. Wijesinghe refused to answer the question, saying that if SMA had not complied with clauses set out in the Agreement then a monitoring committee from the BOI would make a study and if necessary cancel the registration in terms of section 17(2) of the Board of Investment of Sri Lanka.

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