CCI order may change realty scene

The imposition of heavy penalty by Competition Commission of India (CCI) on real estate major DLF in Belaire complex case for breaching the norms regarding fair pricing is likely to have serious ramifications on the real estate industry in the city. 

This will act as a catalyst for revision of all one-sided clauses in the Builder-Buyer Agreement. After all, buyer-builder agreement has always been accused of being a one-sided affair. Moreover, at a time when the sector is under heat from every possible quarter, the news may be dampener for the realtors expecting some booking at the festive season ahead.

The commission in its order observed that DLF, which has market dominance, had abused its powers, building Belaire without getting no-objection certificates (NOCs) or seeking clearance from the state for changes that were made to its original plans. The Director General, who conducted a thorough probe of allegations, had found that originally the project was conceived with 19 floors.

The DG had submitted that the red herring prospectus of May 2007, filed with the SEBI stated, “The Belaire is expected to be completed in fiscal 2010 and consisting of 364 residential units with approximately 1.3 million square feet of saleable space in five blocks of 19 to 20 floors each.”

However, DG found that this norm was revised mid-way and the consumers were not told about this till October-December 2007. And when this issue was raised, only a hint of possible increase in floors was given to one of the allottees.

According to the Belaire residents’ association, DLF has charged “exorbitant late fees and interest for delayed payments made by the buyers and the agreement between the apartment owners and DLF is one sided.

The association claims to have found anomalies in the developer’s argument where DLF has said that the entire phase-V area is a single group housing society.

“We had written to the town and country planning department asking whether commercial areas could be included in a group housing colony and they said that such an option was not available. We have decided to move Punjab and Haryana High Court,” said the association’s financial head, Amit Jain.

Coming down heavily on the misuse of dominant position by DLF, the CCI said, “There appear to be no mitigating factors for taking a lenient view as the abusive practices have been carried on with the object of undue economic gains and business profits. On the other hand, the consistent practice of executing unfair conditions and holding out false representations and exploiting the dominant position has come on record which are certainly aggravating factors.” It said that the hefty penalty was being imposed “to adopt a deterrent approach so that recurrence of such conduct.