An order by anti-trust regulator
Competition Commission of India (CCI) against realty major DLF,
amending its agreement with apartment buyers of three different
projects and making it more equitable and fair, may well pave the
way for a model pact for property sales to ensure fair play in
The regulator said in the order that the apartment buyers'
agreement was amended to remove the abusive and unfair conditions
present in the original "one-sided" agreement. Though the order
has sparked a legal debate on the jurisdiction and other matters
concerning the real estate sector, the entire episode has once
again opened up a pandora's box with regard to sale agreements of
real estate companies.
It is an open fact that sale agreements are loaded heavily in
favour of developers who put in one-sided clauses that give them
discretion with regard to change in zoning plans, lay-out plan,
floor plan, specifications, usage pattern, alteration of structure
and hidden charges.
These skewed buyers agreements, which spell out terms and
conditions with respect to sale and purchase of property, have
many pitfalls. Quite often, the buyers complain that the developer
did not deliver what he promised in terms of facilities and
There are also disputes over inferior quality of construction and
poor specifications of material and accessories. It's not just the
case of amenities; buyers also feel cheated in terms of space. In
fact real estate developers exploit the carpet area-super area
ambiguity to charge arbitrarily. What makes matters worse is that
there is no fixed ratio of super built-up area to carpet area and
no transparent and justified way of calculating it. And many a
time developers do not even disclose the exact break-up of carpet
and super area.
With the help of the biased sale agreement, developers also make
property buyers shell out extra money (hidden charges) as these
charges do not find mention in the builder-buyer agreement and
even if these are there, these charges including external
development charges (EDC), internal development Charges (IDC),
preferential location charges (PLC), are not specified.
There are instances when super area is increased without
increasing the carpet/built-up area. As a result of this, all
other charges like PLC, EDC, IDC and maintenance fee get enhanced.
Home buyers are also short-changed on account of delayed delivery
as they end up paying extra pre-EMIs for the period of delay which
amount to higher interest payment and longer overall tenure.
In fact, for developers, it pays to delay, especially when the
home buyers agreement has a price escalation clause. Moreover, as
per the penalty clause in the agreement, developer only promises a
meagre compensation of Rs.5 per square foot per month, whereas he
charges 18 percent penal interest when the buyer defaults in his
Against this backdrop, the order has come as a whiff of fresh air
for the property buyers. And now the housing ministry's decision
to introduce long-pending real estate regulatory bill in the
coming Budget Session of parliament further renews their hopes.
As per the draft bill, real estate developers are required to
register all projects before sale of property, disclose project
details, contractual obligations and status of clearances. The
regulator will also prevent developers from delaying projects and
diverting funds by making it mandatory for them to deposit 70
percent of project funds in escrow account.
All this holds out hope of providing a fair deal to property
consumers by ensuring transparent and ethical real estate
Vinod Behl is the editor of Realty Plus, a real estate
monthly. He can be reached at email@example.com