CDA loses 25% of auction revenue as buyer defaults

CDA loses 25% of auction revenue as buyer defaults

ISLAMABAD: The Capital Development Authority (CDA) lost around 25 per cent chunk of due revenue through a recent auction of commercial plots as a successful bidder of the plot number 4-C situated at the Diplomatic Enclave has failed to deposit the first instalment within the given timeframe.

The civic body had auctioned 15 commercial plots worth of Rs.8.4 billion in two days' auction last month. The due amount expected from successful bidders was Rs.2.10 billion as the first instalments, but the Authority has received only Rs.1.59 billion as a successful bidder against the plot situated in the Diplomatic Enclave has defaulted and did not submit the first instalment of Rs.0.50 billion.

As per policy of the CDA, the relevant formation put highest bids against each plot before the civic body's board for its final approval whereas after the approval, the relevant formation issues 'Provisional Bid Acceptance Letter' to the successful bidders. It is mandatory that the successful bidder shall deposit 25 per cent of its total premium after adjusting his token money within 72 hours (three days) after the issuance of the said provisional letter. An additional period of 72 hours will also be allowed on payment of delayed charges as determined by the Authority.

The plot 4-C of Diplomatic Enclave was quite suspicious since its incorporation in the list of plots to be auctioned while the successful bid was also placed from a relatively unknown party hailing from Khyber-Pakhtunkhwa.

It is not the first time that the successful bidder defaulted on the payment stage but a number of other examples are already available in past.

A source briefed Daily Times that the Authority auctioned the commercial plots worth around Rs.158 billion since 2005, while around Rs.10 billion is still pending on the account of buyers. While declaring court litigations a major reason behind short payment he further argued; "it is our soft policies, which motivated buyers to bid the highest rate and then default with the civic body."

When questioned the Member Finance, CDA, Dr Fahad Aziz, how the chances of such defaults can be overcome, he answered: "We have a sole mechanism of token money, which we seize in case of default." He said further: "We had increased the ratio of token money in the recent auction, if it happens again then we don't have any other option to curtail the trend of default."

However, an officer of the planning wing commented: "The default on acceptance of the plot's stage definitely damages the financial interests of the civic body, but it become more graver when a party defaults after taking the possession of the plot on the time of second or third instalment as it has happened in the cases of the Grand Hayat Hotel and Safa Gold Mall."

Daily Times has learnt that the CDA even did not have a policy to bar such defaulters in future auctions as the revenue collection in a professional manner is never a priority for the civic body's higher ups.

The top management is more interested to sell the plots and pass their tenure and nobody bothered to revise and reform the policies. As per the budget document 2015-16, the civic body met its 60 per cent expenditure through the auction of plots or by recovering the balance amount of previously sold plots.

The Authority has generated only 16 per cent budget through other sources i.e. taxes, water charges; whereas, the federal government had also given a loan of five billion rupees to the Authority which was 23 per cent of the last budget.