Public Utility Building, K.R. Market, Malleswaram market and some other landmarks continue to be mortgaged to the Housing and Urban Development Corporation (HUDCO). Despite efforts to repay and restructure its loans, eight properties continue to be pledged.
In an RTI reply to Wg. Cdr. (retd.) G.B. Athri, the Bruhat Bengaluru Mahanagara Palike (BBMP) revealed that of the total 11 properties pledged, three were retrieved in 2016. The total market value of the eight properties mortgaged with HUDCO is ₹2,872.27 crore while the loan outstanding is ₹1,434.39 crore.
“The city is paying several hundred crores annually as interest for these loans. It is high time that the BBMP and State government work out a solution to clear the loans to save the interest and retrieve the iconic buildings,” Mr. Athri said.
Interest amount
The interest rate of 10.15% is higher than the current lending rates, sources said. For a loan of ₹1,645.85 crore availed in 2011-12 and 2012-13, the civic body has already paid interest of over ₹1,100 crore.
In 2015-16 the civic body repaid ₹435.94 crore towards the principal and got three properties – Johnson Market, Kempegowda Museum and Mayo Hall building – back from HUDCO. In 2016-17, the civic body paid ₹361.99 crore towards interest.
M.K. Gunashekhar, Chairman, Standing Committee on Taxation and Finance, BBMP said that the aim is to repay another part of the principal and retrieve two more properties.
Apart from the interest burden, the civic body is struggling to clear pending bills of contractors. BBMP Commissioner N. Manjunath Prasad said bills up to January 2016 have been cleared and the pending amount has come down to below ₹900 crore.
However, T. Venkatesh, general secretary, BBMP Contractors’ Association, said some bills date back to October 2015 and said that outstanding amounts to over ₹1,000 crore.
Experts suggest debt restructuring
Urban experts tracking the finances of the civic body do have a good word for the BBMP for bringing down its debt and pending bills over the past two years. They recommend restructuring the loans and help from the State government to clear pending bills to make the BBMP financially stable.
“The State government needs to support the BBMP in debt restructuring instead of only giving grants for large infra projects,” says Srikanth Viswanathan, CEO, Janaagraha Centre for Citizenship and Democracy. “The debt restructuring package should come with institutional reform conditions linked to audited balance sheet, internal audit, improvement in property tax collections, faster tendering of projects etc.”
V. Ravichandar, member, BBMP Restructuring Committee, said that if the civic body's liabilities are cleared, it can be held accountable for its finances and revenue generation. However, he cautioned that old habits die hard and a bail out has to be on the condition of fiscal prudence in future. “Care needs to be taken to ensure the BBMP doesn't fall into a debt trap again,” he added.
