FE Editorial : Estate of play

Jan 05 2013, 01:10 IST
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SummaryThough the Competition Commission of India has only modified the apartment buyers’ agreement between buyers and real estate major DLF, the move will have large implications for wannabe flat owners across the country.

Buyer-builder agreements get less unfair

Though the Competition Commission of India (CCI) has only modified the apartment buyers’ agreement between buyers and real estate major DLF, the move will have large implications for wannabe flat owners across the country. Indeed, CCI chairman Ashok Chavla is on the record saying the modified agreement should be made a model framework agreement for all commercial deals between builders and flat-buyers irrespective of whether the builders were dominant players.

In the original DLF case for which CCI fined it R630 crore for abusing its dominant position—DLF argued it was one of many builders and so wasn’t a dominant player—the flat-buyers had argued the agreements they had were one-sided. DLF, for instance, could change the layout plan without the consent of the allottees, charge them for preferential allotments and give them an interest-free refund if the allotment wasn’t possible, pay very small penalties for delays (1% per year) while charging flat-buyers 15-18% interest for late payments. Most notably, Belaire (one of the apartments) buyers signed up for 19 floors with 368 apartments but got stuck with 29 floors and 544 apartments. According to CCI, buyers had paid up to a third of the total consideration—and were paying huge EMI’s on this—before a single brick had been laid.

While CCI has now changed the agreements for DLF and made the terms equal for both the builder and the buyers, this is likely to be the format for all realty deals in the future. After all, if any flat-buyer goes to CCI arguing the agreement with her builder is one-sided, the CCI will likely apply its DLF ruling.

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