NEW DELHI: On a recent Saturday afternoon, the A6 DDA market in West Delhi's Paschim Vihar looked desolate. Rows of shops remained shut and a few people milled about unhurriedly as the summer heat soared. On the third floor of the complex, up a dark flight of stairs with betel-juice-stained walls, the office of an obscure real estate company called PACL India Ltd was an oasis of activity.
Hundreds of people had gathered there, giving it the appearance of a busy bank branch on payday. Transactions abounded across counters, people chatted animatedly in small groups, and streamed in and out amid long, snaking queues.
From this office and 279 more across India, PACL runs an operation that the Securities and Exchange Board of India (Sebi) deems illegal because it considers it a collective investment scheme in the garb of a real estate company. But the final word has not yet been said about what kind of an animal PACL actually is. That dispute will be settled by the Supreme Court, where the case has lain for eight long years.
ET spent six weeks interviewing about two dozen people to piece together the picture of a company that looks suspiciously like a pyramid scheme and whose downfall could wipe out the savings of millions of people. While the dispute waits to be resolved by the Supreme Court, PACL has grown a 100-fold, aided by customers who have given money to the company ostensibly to book a plot of land they can't see or choose. Deposits with PACL-the company calls them 'customer advances'-have ballooned to Rs 20,000 crore.
It has used the money to buy land in various parts of the country, including barren desert land. Its land bank, PACL said in a filing with the Registrar of Companies, is 1.85 lakh acres, roughly the size of Bangalore (In comparison, large realty firms such as DLF or Unitech typically own 12,000-15,000 acres). More than the prospect of owning land, customers are more likely lured by the 'expected value of land' the company indicates for investment terms ranging from 5 to 10 years.
This works out to more than a 12.5% annual return on investment. PACL's deposits are brought in by a network of about 8 lakh agents, who are organised in the manner of a classic pyramid scheme, or "chain system", and stake their credibility for the company in return for attractive commissions on deposits brought in by them and other agents linked to them in the chain.
If the Supreme Court decides in favour of Sebi and says PACL indeed operates a collective investment scheme that must be strictly regulated, several million small investors risk losing the savings they have invested in the hope of an attractive return.
Those at the bottom of the pyramid will be the worst affected. PACL is perhaps only the largest among a number of such schemes mushrooming across the country.
Source : http://economictimes.indiatimes.com/
Hundreds of people had gathered there, giving it the appearance of a busy bank branch on payday. Transactions abounded across counters, people chatted animatedly in small groups, and streamed in and out amid long, snaking queues.
From this office and 279 more across India, PACL runs an operation that the Securities and Exchange Board of India (Sebi) deems illegal because it considers it a collective investment scheme in the garb of a real estate company. But the final word has not yet been said about what kind of an animal PACL actually is. That dispute will be settled by the Supreme Court, where the case has lain for eight long years.
ET spent six weeks interviewing about two dozen people to piece together the picture of a company that looks suspiciously like a pyramid scheme and whose downfall could wipe out the savings of millions of people. While the dispute waits to be resolved by the Supreme Court, PACL has grown a 100-fold, aided by customers who have given money to the company ostensibly to book a plot of land they can't see or choose. Deposits with PACL-the company calls them 'customer advances'-have ballooned to Rs 20,000 crore.
It has used the money to buy land in various parts of the country, including barren desert land. Its land bank, PACL said in a filing with the Registrar of Companies, is 1.85 lakh acres, roughly the size of Bangalore (In comparison, large realty firms such as DLF or Unitech typically own 12,000-15,000 acres). More than the prospect of owning land, customers are more likely lured by the 'expected value of land' the company indicates for investment terms ranging from 5 to 10 years.
This works out to more than a 12.5% annual return on investment. PACL's deposits are brought in by a network of about 8 lakh agents, who are organised in the manner of a classic pyramid scheme, or "chain system", and stake their credibility for the company in return for attractive commissions on deposits brought in by them and other agents linked to them in the chain.
If the Supreme Court decides in favour of Sebi and says PACL indeed operates a collective investment scheme that must be strictly regulated, several million small investors risk losing the savings they have invested in the hope of an attractive return.
Those at the bottom of the pyramid will be the worst affected. PACL is perhaps only the largest among a number of such schemes mushrooming across the country.
Source : http://economictimes.indiatimes.com/
