Online realty platform IndiaHomes.com has suspended its primary new apartment sale business after being found in violation a condition set in the country's new ecommerce marketplace rules.
According to an opinion the business sought from law firm OP Khaitan & Co, IndiaHomes is in contravention of one of the 10 conditions laid out under India's Foreign Direct Investment (FDI) guidelines.
The rule says e-commerce companies with a marketplace model will not influence, directly or indirectly, the sale price of goods or services that they sell.
IndiaHomes is seen to be in breach of this guideline because it offers discounts to buyers on homes from the commissions paid by builders, thereby influencing the final sale price a local media report explains.
"IndiaHomes... offers discounts to buyers on homes of developers they sell on the site. This discount is given from the commissions the company gets from developers. The view is that by doing this they indirectly influence final sale price of a home, which violates the FDI condition," the Indian Economic Times report says.
The company had been struggling with other issues including recovering receivables of around Rs 100 crore from builders for the last two years in a slow market and avoiding legal action from entities to whom it owes around Rs 40 crore.
IndiaHomes is also suffering several resignations including founder, chairman and managing director Samarjit Singhand and board members Bala Deshpande, Sanjeev Aggarwal and Ashu Garg who represent company investors New Enterprise Associates (NEA), Helion Ventures and Foundation Capital respectively.
The report also says investors concerned about new provisions in the real estate regulatory bill which incorporate criminal liability on part of brokers, have decided to sell their combined 87 per cent stake in the platform to Mauritius-based fund Pinnacle Capital for Rs 240-250 crore.
The sale is understood to enable recovery of the amount invested so far, which comes to a total of around $36 million.
Founder Samarjit Singh will continue to hold his 13 per cent stake in the company, according to the report, but investors NEA which had contributed $17 million over multiple funding rounds, Foundation Capital which put in $11 million and Helion Ventures which added a further $8 million, will no longer fund the platform.
In addition, the report says the new investor is buying the company without taking on any employee liability from the division that has been closed, though it will get rights on the Rs 100 crore pending receivables of that division.
The remaining company includes its secondary services group, which provides sales leads to brokers and builders and its business associates venture. It will continue to run alongside the platform's international arm, UK-based property advisory firm Unesta, acquired in 2014.
IndiaHomes was also in talks with another property portal Housing.com for a merger but talks fell through recently.