Jan 04, 2013, 06.06 PM IST | Source: Moneycontrol.com

CCI order a small victory for buyers

The order of Competition Commission of India on DLF has not come a day later and is a big win for the common man. This ofcourse pertains to two projects only, but has wide implications for all projects henceforth.

Suresh Sadagopan

Founder, Ladder7 Financial Advisories

Expertise : Mutual Funds

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The order of Competition Commission of India on DLF is a big win for the common man. This ofcourse pertains to two projects only, but has wide implications for all projects henceforth. The common man has been at the receiving end of one-sided, loaded agreements everywhere be it real estate, home loans, insurance, stock trading agreements etc. We have always been living with a bad bargain.

It is in this background that this order comes as a whiff of fresh air,  for the man on the street. Real estate companies have not been transparent and buyers have to their surprise found that the promised parks vanish and buildings are constructed, stilt parking gets converted to flats which are sold off, parking areas are sold though they are not supposed to, promised amenities inside the flats are not delivered and so on. 

The agreements are drafted by the real estate companies and the buyer can "take it or leave it". Most anyway do not even read the agreement which legitimizes the unfair agreements they enter into. The common man does not have any recourse to speak of from the legal system as it exists today. Also, the real estate sector has an unholy nexus builders, underworld, politicians ( many companies are fronts for politicians ) & bureaucrats ( for various sanctions ) where strong arm tactics, intimidation & coercion is not ruled out.

Fair trade practices are the need of the hour. CCI order seeks to strikes down inequitable and one-sided clauses that work against the buyer’s interest. CCI has modified the agreement between builder and buyer through a supplementary order, for the case in question. 

The builders cannot construct beyond the approved plans and will no longer enjoy sole ownership of open spaces, as before. Some builders have started paying a penalty for not delivering on time. But in most cases, it is only the buyer who pays penalties and the builder gets away with impunity. CCI has directed DLF to pay the same penalties it imposes on buyers, which is equitable.

The commission has also found deviations to the mandatory provisions which developers need for group housing projects need to follow, which DLF has deviated from.

The order from CCI will await adjudication from Competition Appellate Tribunal, which is expected to  pass through. This is expected to serve as a model agreement between buyers and builders in future. This is a path breaking order which will put the buyers and developers on a more equal footing, in future. 

Definitely a victory for the buyers.

DLF stock price

On April 16, 2014, at 10:32 hrs DLF was quoting at Rs 165.95, up Rs 0.00, or 0.00 percent. The 52-week high of the share was Rs 254.75 and the 52-week low was Rs 120.25.

The company's trailing 12-month (TTM) EPS was at Rs 1.43 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 116.05. The latest book value of the company is Rs 67.21 per share. At current value, the price-to-book value of the company is 2.47.

READ MORE ON  DLF, CCI, real estate, builders
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