On Monday, 19 May, the Competition Appellate Tribunal, a statutory organisation established to hear and dispose of appeals made by the Competition Commission of India, upheld a penalty of Rs 630 crore that had been slapped on the real-estate firm DLF by the CCI in 2011. The penaltywas imposedafter flat-buyers associations in DLF Park Palace and The Belaire in Gurgaon complained that possession of their apartments was being delayed by DLF because the firm had decided to build more floors than originally planned in the two projects. The decision also highlighted the fact that various clauses in the buyers agreement, such as one on alteration of building structure, were penned to DLF's advantage. The Competition Appellate Tribunal has upheld the penalty and stated that the abuse of DLF's dominant position is to be dealt with firmly.
In this extract from our January 2014 reportage piece on how brokers of land and power built Gurgaon, Praveen Donthi talks to some of the affected buyers of various DLF projects at a time when the COMPAT case was still under consideration.
In 2011 a shot was fired across the bow of Gurgaon’s leading real estate developer by the Competition Commission of India (CCI), which fined DLF Rs 630 crore for various abuses in a case involving owners of flats in The Belaire, an apartment complex in east Gurgaon. Situated not far from the Delhi border and the road to Faridabad, The Belaire is made up of five 29-storey towers that went on the market in 2006. Due to be completed by January 2010, construction of the complex dragged on; some owners still don’t have possession of their flats. In the meantime, DLF revised the building plans from what had been stipulated in the builder-buyer agreements. When owners complained, the developer took recourse to the complex, manipulative clauses in those same agreements to brush them aside.
A group of Belaire buyers who had found each other airing similar grievances online soon formed the Belaire Owners Association (BOA). In May 2010, the association filed charges with the CCI, accusing DLF of abusing its dominant position in the market in order to enforce unscrupulous contracts on buyers. Sanjay Bhasin, president of the association and vice president at the telecom company Viom Networks, enumerated the residents’ complaints for me in broad strokes: construction of the Belaire apartment complex had been delayed; DLF had effected a unilateral change in the building plans; and there was a suppression of terms in buyers’ contracts.
The CCI soon launched an inquiry and, for the first time, many of the real estate practices that had helped build and populate Gurgaon were brought to light. It emerged that when it collected money from buyers, DLF had no approvals for The Belaire—not for the original 19 floors it sold, nor the additional ten it later tacked on to each tower. Other related manipulations included violation of the state-mandated floor area ratio (FAR) restriction—the ratio of a building’s total floor space (on all storeys) to the size of the plot on which it stands. The Belaire plot took up only 6.67 acres, which the owners’ association calculated was 14 acres less than would be necessary to meet the FAR requirements. The CCI found that Belaire residents had technically paid for and were entitled to land that had instead been left open to further development. Sanjay Sharma of Qubrex brokerage helped the Belaire owners with research for the case. He told me that violating FAR norms “has become the easiest way of making money for the builders”. When I visited Belaire with Bhasin and other members of the BOA, I noticed a cordoned-off patch of grass in the middle of the complex. Bhasin told me that it was village panchayat land that is still under dispute.