NSW property group Bathla scrambles to raise cash, faces collapse

One of New South Wales’ biggest apartment builders, the Bathla Group, faces a Tuesday evening deadline to raise enough funds to continue to operate under the control of administrators appointed to the indebted group last week.

If the money can’t be raised, 350 staff at the company’s head office face immediate dismissal, administrator Stephen Longley said Tuesday morning, throwing into turmoil 219 housing and apartment projects across NSW.

“We’ll start planning at the end of the day for the wind down of the business, and we’ll be meeting with staff,” the Teneo managing director told the Today show. “Payroll is due on Thursday. As administrators, we’re personally liable for paying that payroll, even if a company doesn’t have any money, which it doesn’t.”

Even if the administrators are successful, the company’s long-term survival looks challenging, creating stress for customers waiting for 2500 partially built apartments and another 14,000 promised homes.

Bad reviews

The company’s financial collapse, which was mooted a year ago, has raised questions about how a company with a reputation for poor-quality work, slow payments to contractors and filing late or incorrect official documents was able to rack up more than $3.3 billion in debt.

Co-founders and brothers Bhart Bhushan and Rajinder Mohan have not been seen or heard from since the administrators took control. Last week Mr Bhushan blamed a “perfect storm” of slowing sales, falling property prices and changes to property taxes in this year’s federal Budget.

The founders received millions in dividends and lived in sprawling houses in Sydney’s outskirts, not far from the suburbs where they sold homes to immigrants hoping to build lives in Australia. Buyers have complained about the quality of Bathla homes for years, accusing the company of poor workmanship, being slow to rectify problems and difficult to communicate with.

“They build tight small houses where kids have to play in shared driveways,” one person wrote on Reddit.

“I have been battling with them for the past 4 years,” another wrote.

Mr Bhushan claims to have only about $100,000 liquid assets, The Australian reported. His personal registered address is a rundown apartment building that appears to be uninhabited, according to the Financial Review.

Great disruption

Bathla’s collapse has added to one of the greatest disruptions to hit the housing market in decades.

While the Budget’s changes to negative gearing and the capital gains tax were intended to drive capital into new houses and apartments like those built by Bathla, they appear to have damaged confidence in the whole market.

In July, planning authorities approved 4.2 per cent fewer houses than in the previous month, a small but worrying shift for a country already undershooting the national target of 240,000 new homes a year. Apartment approvals fell 0.4 per cent.

About 35,000 of the homes approved aren’t getting built, in part because construction costs are rising faster than inflation. Building a house costs 37–48 per cent more than in 2020. Interest rates could rise again, reducing access to mortgages.

Property prices fell in every capital city, except Darwin, in the three months ended August 31, according to Cotality, a property research company.

The number of new homes sold has dropped every month for three months, according to the Housing Industry Association.

“You have both fiscal and monetary policy contributing to the downturn,” AMP economist My Bui said. “We expect property prices will fall 10 per cent peak to trough.”

Private credit

The Bathla collapse is a blow to what is known as “private credit”, the savings of rich people lent to borrowers who can’t secure loans from the big banks. Some of the biggest brands in private credit lent to Bathla, and have been asked for even more money to help complete individual projects.

By paying for the completion of Bathla’s houses and apartments, the lenders can get their money back, the administrators have argued. Some creditors have already stepped in and are funding individual projects linked to their loans.

The size of any losses suffered by Bathla’s creditors will take time to determine. The private credit market is estimated around $200 billion, suggesting the potential losses are relatively small.

But the $3 billion collapse was fuelled by private credit, heightening concerns expressed by regulators for years about an industry that has emerged with little supervision or controls.

ASIC chair Sarah Court last week described Bathla’s problems as “the first significant cracks” in the industry.