FE Editorial : Estate of play

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The Financial Express: Jan 05 2013, 01:10 IST

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

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Deendayal Lulla | 05-Jan-2013Reply | Forward

There is also another issue of redevelopment of old buildings. In redevelopment,a housing society should ideally invite tenders from multiple builders so as to get the best deal. However,strange things happe in redevelopment. A builder without disclosing terms and conditions for redevelopment,approaches the managing committee of a society,and the society also for reasons unkown does not ask the builder about the terms and conditions,and just asks the members to let thesociety know if they are interested in redevelopment. Without knowing the terms and conditions ,and a member cannot from an opinion about the redevelopment. No profile of th builder is circulated to members,and no special general body meeting is held on redevelopment,as mandated by bylaws and the society wans the consent of the residents to allow the builder to measure the area of each falt. The soiety should safeguard the interest of members. Nothing is put on the notice board of the society. The society should also appoint a consultant for redevelopment. The existing flatowners are treated as second class citizens in a redevelopment scheme,and new buyers may get royal treatment as they are cash cows for the builder. In an ideal redevelopment,the number of floors should remain the same,as was the case earlier. The residents themselves can appoint a contractor,and go for redevelopment. The managing committee should not hide any information from members,and members should also not be greedy about getting more area,and a good amount of money in redvelopment scheme,as builders often lead the gullible flat owners on a garden path,and later leave them in lurch.