Ending weeks of uncertainty, the Delhi Development Authority has finalised a bailout formula for the cash-strapped Commonwealth Games Village project. DDA has announced a Rs700-crore bailout package for Emaar MGF, which is contracted to develop the games village. A part of the fund, which will be given in instalments based on stages of completion of the project, will be handed over immediately.

The project had got mired because Emaar was unable to raise the required financing in the prevailing recessionary conditions. Rather than a direct loan, the bailout involves the purchase of 333 flats by the land development authority in the CGV project.

The price at which the flats will be bought is 13 per cent higher than what was recommended by an expert committee constituted by the government to decide the modalities of bailing out the Indian unit of Dubai-based Emaar. However, the overall package is below the Rs100 crore that Emaar was seeking.

DDA spokesperson Neemo Dhar maintained that the fund should not be seen as a loan, but as a price paid for the flats, which DDA would sell later, along with the flats that were to be handed over to the agency as a part of the original agreement.

Dhar said, "Out of the 1100 flats that are to be built, two-thirds were to be handed over to us after completion. Now, the 333 flats will form an additional part of the number which will be coming to DDA.''

The funds infusion means Emaar MGF can finally proceed with the massive project, which has drawn criticism on grounds of viability as well as unacceptably slow progress. When tenders were floated for the project, the company had signed the deal at Rs435 crore for the land alone. The deal envisaged that Emaar would pre-sell its share of flats at market rates to raise funds.

However, its attempt to sell the flats found few takers at the offer price of Rs12,500 per sq ft, driving the company MGF to seek a DDA bailout. The DDA had decided to pay Rs 11,000 per sq ft for the apartments, against the expert committee's suggestion for Rs9,382-9,720 per sq ft, it said in an e-mail today.

According to Dhar, "DDA's decision to invest in the Games Village is a very positive development and signifies the national importance of the project. This move is a firm step in ensuring the completion of the prestigious project. We are committed to the timely delivery of the games village.''

The DDA mail added, ''Since the purchase of flats is the only viable option, it has been decided to purchase 333 flats for approximately Rs700 crore at a price of Rs 11,000 per square feet, which is much below the rate being charged by Emaar MGF from the buyers in the open market.''

Emaar MGF, under a private-public partnership with the DDA, had won the contract to develop 1,168 flats. The company had hoped to sell 70 per cent (778) of these and to use the cash from the sale to finance the construction. The CGV is being built to house the 8,500-odd athletes and those who accompany them.

The price at which the DDA plans to buy the flats, though higher than that recommended by the panel, will set a lower benchmark for the flats to be sold at the village in future. This is also likely to force earlier investors to ask for discounts on the flats already sold by the developer, according to analysts.

The project is scheduled to be completed by April 2010, a few months before the Games. It is so far 43 per cent complete, against the target of 45 per cent. The government has been under pressure to come out with a bailout package to keep the construction on schedule. The price fixation committee report said Emaar had spent nearly Rs788 crore so far.