Next chapter for India's troubled resort

Once envisioned as India's answer to the Italian Riviera, Lavasa has struggled to live up to its ambitious promises. 

Nearly 25 years after investors launched a private venture to develop and manage a hillside resort four hours from Mumbai, only 5,000 residents remain in the abandoned shell of what was intended to be a series of idyllic communities housing 300,000 people, Caliber.Az reports, citing foreign media.

The latest setback came last week when the bankruptcy court dismissed the only entity that had offered hope for Lavasa Corp. after six years of insolvency. Creditors will now resume their search for a savior. Located in the Sahyadri mountain range along India’s western coast, Lavasa was envisioned as India’s answer to Portofino, a renowned destination on the Italian Riviera. The project aimed to create luxury enclaves for the affluent, providing an escape from the inadequate urban planning and administrative inefficiencies plaguing Indian cities. Despite its initial promise, the project faltered after completing just 20 per cent of its first phase and is now burdened with around $1 billion in liabilities, predominantly owed to financial institutions.

Homebuyers who never received their properties lost $63 million in lease payments, while those who did move in are living in a deteriorating ghost town. Recent landslides have claimed three villas, trapping two electricians inside one of them. Lavasa serves as a stark reminder of the challenges facing India. The country’s government struggles with limited funds, inadequate executive capacity, and a lack of political will to provide much-needed breathing spaces and retirement communities for its densely populated megacities like Mumbai, Delhi, and Bengaluru. The private sector, however, lacks a miracle solution. The ambitious concept of a city entirely funded and managed by private capital has proven to be an elusive dream. 

Even with the 2016 introduction of a bankruptcy law designed to rescue trapped capital from high-risk ventures like Lavasa, progress remains slow, with state-run creditors accepting significant losses. Ajit Gulabchand’s HCC Real Estate Ltd. (HREL), originally holding a 69 per cent stake, was a major player in Lavasa’s venture. Along with other large shareholders, HREL secured funding through debt, offering guarantees and pledges of shares. By May 2018, Lavasa had defaulted, and a Bloomberg News report depicted the decline: deteriorating sidewalks, garbage festering in the lake, an incomplete hotel construction for seven years, and Gulabchand estimating a $1.5 billion cost to revive the project. It soon became apparent that Gulabchand would not be part of the solution. 

In August 2018, Lavasa declared bankruptcy, and control of the township shifted to an administrator. The banks chose to recover ₹60 billion (about $700 million) through the sale of Lavasa, opting not to enforce the guarantees. By July 2023, the insolvency tribunal approved the sale to a new owner, releasing all securities and pledges, which meant over $900 million of HREL’s assurances vanished. In March 2024, Gulabchand’s Hindustan Construction Co. sold its stake in HREL for $12,000, with both the guarantee and the guarantor gone. Since March 2020, Hindustan Construction shares have surged nearly twelvefold. However, other stakeholders were less fortunate. Darwin Platform Infrastructure Ltd., the lender-selected savior, soon faced trouble with India’s anti-money laundering authorities. 

The company failed to complete the insolvency resolution, which had promised creditors $137 million over nine years, a small fraction of the total owed. Darwin’s difficulties led to accusations against the creditors for illegally pocketing the surety against the purchase. Last week, the tribunal ruled in favor of the creditors, and the sale process will restart. This means the long wait for the promised new houses will continue. 

The original dream of Lavasa, which included luxury amenities such as golf courses, amusement parks, a NASA research center, and an Oxford University business school campus, has faded. Instead, the town's population is maintained by a desolate old-age home and a college, Christ University of Bengaluru. Lavasa’s once-wealthy residents, including former ministers, celebrities, and top officials, now face a reality far removed from their original vision. 

As one resident described, their struggles include carrying umbrellas to the bathroom during monsoons. India’s bankruptcy law, focused more on power than justice, has created a power vacuum. Deadlines for converting farmland to commercial use have passed, environmental clearances have expired, and politicians have shifted their focus to upcoming elections, leaving the Lavasa project languishing without further development. 

Creditors might contemplate liquidating Lavasa Corp. and transferring management to the municipal authority of Pune, the nearest major city. Alternatively, they could creatively repurpose their investment in the 10,000 acres of farmland and the manmade lake into a vibrant community of rain-kissed retreats. Instead of relying on corporate or governmental infrastructure, residents could build their own cottages, with basic infrastructure provided by a community-based collective.

Lavasa is unlikely to become one of the 100 “smart cities” promised by Prime Minister Narendra Modi. However, it might find a more fitting role as a model for a "smart village," offering a more viable and appealing alternative to a bankrupt, unfinished city that only has a lonely street named after Portofino.