Karnataka Housing Fraud Exposed: Contractors Receive Payment While Beneficiaries Build Own Homes

Hans India

30-06-2025

A significant housing fraud has been exposed in Karnataka's Haveri district, revealing how contractors collected government payments for home construction under the Pradhan Mantri Awas Yojana while compelling beneficiaries to build their own residences. The scheme defrauded the Housing for All program by transferring construction responsibilities to vulnerable recipients despite contractors receiving full compensation.
The scandal emerged during a meeting with Haveri district minister Shivanand Patil, who subsequently ordered an official investigation. An exclusive inspection report from May 2025, obtained by authorities and submitted to the Deputy Commissioner, documents extensive irregularities across multiple administrative areas including Savanur, Shiggaon, and Bankapur regions.
Under standard protocol, the Housing Department should complete construction projects on behalf of the Karnataka Slum Development Board before transferring finished homes to designated beneficiaries. However, investigation findings reveal contractors systematically informed recipients they would receive only building materials and labor equivalent to 350 square feet, with actual construction becoming the beneficiaries' responsibility. Even this limited support was frequently provided incompletely, with materials supplied at only 50 percent capacity and labor payments remaining unpaid.
In Savanur taluk, authorities sanctioned 696 houses requiring Rs 43.71 crore in total funding. While 545 units reached completion status and 151 remained under construction, the project suffered from significant implementation failures. Work commenced in October 2021 under contractor M/s Nakshatra Infrastructure, managed by Selvi Shanmuga. Despite releasing Rs 28.97 crore in funding and distributing Rs 10.54 crore to 527 beneficiaries through the Gruha Bhagya scheme, numerous homes remained unfinished. Site inspections revealed missing plastering work, absent electrical connections, and evidence that beneficiaries had undertaken construction tasks independently with minimal contractor assistance.
The Bankapur area presented similar violations, with 454 sanctioned houses requiring Rs 27.76 crore in estimated costs. Contractor G Chandregouda initiated work in October 2021, but inspection results showed only 100 completed homes, 154 under construction, and 200 pending due to site clearance complications. Financial disbursements totaled Rs 12.32 crore, with Rs 7.57 crore released and Rs 3.74 crore distributed to 187 beneficiaries. The investigation documented identical problems: partial material provision, unpaid labor costs, and unavailable electricity in multiple residences. Some beneficiaries constructed homes exceeding approved dimensions, reportedly without official contractor support.
Shiggaon taluk operated under two separate housing packages. The first package encompassed 500 houses valued at Rs 26.54 crore, with construction beginning in July 2021 under contractor Krishnamurthy & Co. Although 474 houses achieved completion and 26 remained in progress, only Rs 17.92 crore had been released from the Rs 25.35 crore financial target. Rs 3.42 crore reached 171 beneficiaries, but contractors were frequently absent during official inspections. Recipients reported completing construction independently with partial support and no labor cost coverage. Multiple homes lacked electrical connections, with contractors remaining unresponsive to beneficiary complaints.
The second Shiggaon package involved 350 houses requiring Rs 20.77 crore in funding. Contractor TN Paramesh of Chair Ventures LLP commenced work in July 2021, achieving 160 completed units and 190 in progress. Financial releases totaled Rs 11.96 crore, with Rs 4.65 crore distributed to 242 beneficiaries. Inspection findings mirrored other locations: contractor absence from construction sites, incomplete beneficiary support, and officials discovering lack of contractor engagement during field visits.
The comprehensive report identifies consistent fraudulent practices across all three administrative areas. Contractors allegedly submitted bills for full payment amounts while providing only partial materials, failed to compensate laborers, and frequently remained absent or unresponsive to inquiries. Beneficiaries faced the burden of completing construction independently, sometimes expanding beyond approved specifications. Essential amenities including proper plastering and electrical installations were commonly missing from completed structures.
The official documentation, dated May 8, 2025, was prepared by the Sub-Divisional Officer of Savanur in collaboration with Executive Engineers from various departments including Public Works, Panchayat Raj Engineering Division, Rural Water Supply and Sanitation Department, and the Karnataka Slum Development Board. The report recommended necessary corrective action and was forwarded to the Deputy Commissioner of Haveri for further legal proceedings.
These revelations coincide with broader political controversy surrounding housing sector corruption, triggered by leaked audio recordings allegedly featuring Congress MLA BR Patil. The recordings suggest widespread corruption within the Rajiv Gandhi Housing Corporation, including bribery requirements for house allocations and systematic disregard for elected representatives' recommendation letters. The conversation reportedly occurred between Patil and Sarfaraz Khan, personal assistant to Housing Minister Zameer Ahmed Khan, indicating potential systemic corruption extending beyond individual contractor misconduct.