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March 25, 2021

House Loan Interest Subsidy Scam of Rs 1880 Cr

by CA Jessica Nagaonkar in Compliance Law, Corporate Law

House Loan Interest Subsidy Scam of Rs 1880 Cr

Pradhan Mantri Awas Yojana (PMAY) is an initiative by the Government of India in which affordable housing will be provided to the urban poor against an inflated real estate sector with a target of building 2 crore affordable houses by 31st March 2022. People from Economically Weaker Sections (EWS) get loans while those from low- and middle-income groups get subsidized loan.

More trouble has ascended for promoters of crisis-hit Dewan Housing Finance Limited (DHFL), Kapil and Dheeraj Wadhawan, after the Central Bureau of Investigation (CBI) on 24th March busted a scam connected to the PMAY.

The promoters are already behind bars on money-laundering charges

  • Last year, the CBI charged Kapil and Dheeraj Wadhawan for allegedly giving kickbacks to Yes Bank founder Rana Kapoor’s family against investments in DHFL.
  • That scam took place between April and June in 2018 when Yes Bank invested Rs 3,700 crore of public money in short-term debentures of DHFL.
  • In return, the Wadhawan’s allegedly paid kickback of Rs 600 crore to Mr Kapoor in the form of loans to a firm controlled by his wife and daughters.
  • The Wadhawan brothers were arrested in April last year. Mr Kapoor was arrested in March.
  • In July, 2019, the Corporate Affairs Ministry proceeded with investigations into reports of siphoning of Rs 31,000 crores by DHFL through its shell companies, as alleged by Cobrapost.
  • Analysts maintained that this could have significant ramifications on the sector, given that DHFL was heavily into housing construction loans, real estate financing, SME loans, loan against property, etc.
  • It also came to light that when the company sold its stake in Pramerica Life Insurance Ltd to DHFL Investments Ltd (DIL), a Rs 2,150.84 crore-fraud owing to undervalued and fraudulent nature of certain agreements surfaced, as reported by auditor Grant Thornton.
  • On October 8, 2020, the Economic Offences Wing of the Tamil Nadu Police arrested the promoters of DHFL, Kapil Wadhawan and Dheeraj Wadhawan, on allegations of defrauding investors of their money by floating bogus schemes, and non-repayment of Rs 218 crores of collected deposits.

New case now registered against the promoters

  • The CBI has now registered a case against them for creating fictitious home loan accounts amounting to over Rs 14,000 crore.
  • The duo earned Rs 1,800 crore in interest subsidy offered the Government of India, the CBI alleged.
  • A financial institution like DHFL grants loans to people who want to build their houses and later claim interest subsidies from the government.
  • The CBI report said that in 2018, the Wadhawan brothers opened 2.6 lakh fake housing loan accounts, many of them under the Pradhan Mantri Awas Yojana, and claimed interest subsidies in a fictitious branch of DHFL.
  • For the period 2007-2019, the company disbursed loans of Rs 14,046 crore, of which Rs 11,755.79 crore were directed to other fictitious firms.
  • Under the scheme housing loans granted to people from Economically Weaker Sections (EWS) and those from Low- and Middle-Income Groups are eligible for credit-linked interest subsidy.
  • The subsidy is to be claimed by financing institutions – like DHFL – that have granted these loans.
  • According to the CBI, in December 2018 DHFL told investors it had processed 88,651 loans under PMAY and received Rs 539.4 crore in subsidies, with a further Rs 1,347.8 crore due.

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