Case No. 19 of 2010. Case: Belaire Owner's Association Vs DLF Limited Haryana Urban Development Authority Department of Town and Country Planning, State of Haryana. Competition Commision of India
| Case Number | Case No. 19 of 2010 |
| Counsel | For Appellant: M.L. Lahoty, Adv. and For Respondents: Rajan Narain and Ashok Desai, Advs. |
| Judges | Ashok Chawla, (Chairman), R. Prasad, Geeta Gouri, Anurag Goel and M.L. Tayal, (Members) |
| Issue | Haryana Urban Development Authority Act, 1977; Punjab Urban Estates Development and Regulations Act, 1964; Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated development Act, 1963; Haryana Development and Regulation of Urban Areas Act, 1975; Punjab New Capital Periphery (Control) (Haryana Amendment) Act, 1971; Punjab New (... |
| Judgement Date | August 12, 2011 |
| Court | Competition Commision of India |
Order:
Order under 27 of the Competition Act
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Background
The case under consideration concerns competition issues and consumer interests in the residential real estate market in India.
1.1 With more than 1.2 billion people, India is the second most populous country in the world after China. Since 1991, a series of economic measures have led India to a higher sustained level of growth which has stimulated development across all sectors including the real estate industry. Since the real estate industry has significant linkages with several other sectors of the economy, investment in real estate sector results in incremental additions to the GDP of the country. Along with the growth in real estate industry, accompanied by increased level of income, demand for residential units has also risen throughout India. Residential sector constitutes a major share of the real estate market; the balance comprising of commercial segment like offices, shopping malls, hotels etc. Apart from its importance as a segment of real estate sector, residential housing has a special place in India where investment in a home remains one of the biggest and most important investment in a person's life. Along with food and clothing, a home is one of the most basic necessities of existence according to economic thought.
1.2 The growth in the residential real estate market in India has been largely driven by rising disposable income, a rapidly growing middle class, fiscal incentives like tax concessions, conducive and markedly low interest rates for housing loans and growing number of nuclear families. The residential sector is expected to continue to demonstrate robust growth, assisted by rising and easy availability of housing finance. The higher income levels and rising disposable income are also expected to lead to demand for the high end residential units, a situation which was not witnessed in the earlier days.
1.3 Indian residential real estate sector offers plenty of opportunities. There is a huge shortage of housing units in semi-urban and urban areas and there is a scope of bridging the deficit. The growth in demand due to rising income and expenditure levels, increasing phenomenon of nuclear families and perception of investment in real estate as secure and rewarding has far outstripped the supply of residential housing. The growing rate of urbanization, coupled with rising income has led to demand for better housing with modern amenities. Also the pace of growth of demand is far higher than the pace of growth of supply due to limited supply of urban land, lack of infrastructure in non-urban area, concentration of facilities and amenities as well as income opportunities in urban areas. This is the reason that the sector is witnessing tremendous boom in recent days. Real estate industry in India was said to be worth $12 billion in the year 2007 and is estimated to be growing at the rate of 30 per cent per annum.
1.4 Previously, government's support to housing had been centralized and directed through the State Housing Boards and development authorities. In 1970, the Government of India set up the Housing and Urban Development Corporation (HUDCO) to finance housing and urban infrastructure activities and in 2002; the government permitted 100 per cent foreign direct investment (FDI) in housing through integrated township development. The residential real estate industry now is driven largely by private sector players. The mushrooming activities in the sector are reflected in the advertisements that come up in the newspapers and number of messages on the cell phones received every day indicating launches of new products. Along with the increased activity in the sector, often reports of problems being faced by the consumers do also surface.
1.5 The informant in this case has alleged unfair conditions meted out by a real estate player. It has been alleged that by abusing its dominant position, DLF Limited (OP-1) has imposed arbitrary, unfair and unreasonable conditions on the apartment - allottes of the Housing Complex 'the Belaire', being constructed by it.
Profile of Parties in the Case
1.6 Before going into the details of allegations, response of different Respondents and proceedings before the office of DG and Commission, a brief profile of different parties involved in the case is discussed first.
A) The Informant
1.6.1 The informant in this case is Belaire Owners' Association. The association has been formed by the apartment allottes of a Building Complex, 'Belaire' situated in DLF City, Phase-V, Gurgaon, being constructed by OP-1. The President of the association is Sanjay Bhasin, who himself is one of the allotees in the complex.
B) Respondents
DLF Limited:
1.6.2 DLF Limited (referred to hereafter as DLF or OP-1 and includes group companies), the main Respondent is a Public Limited Company. It commenced business with the incorporation of Raisina Cold Storage and Ice Company Private Limited on March 16, 1946 and Delhi Land and Finance Private Limited on September 18, 1946. Pursuant to the order of the Delhi High Court dated October 26, 1970, Delhi Land and Finance Private Limited and Raisina Cold Storage and Ice Company Private Limited along with another DLF Group company, DLF Housing and Construction Private Limited, merged with DLF United Private Limited with effect from September 30, 1970. Thereafter, DLF United Limited merged with another Company, then known as American Universal Electric (India) Limited (incorporated in the year 1963), with effect from October 1, 1978, under a scheme of amalgamation sanctioned by the Delhi High Court and the Punjab and Haryana High Court. The merged entity was renamed as 'DLF Universal Electric Limited' with effect from June 18, 1980. In 1981 DLF Universal Electric Limited changed its name to DLF Universal Limited and in 2006, DLF Universal Limited changed its name to DLF Limited.
1.6.3 DLF with its different group entities has developed some of the first residential colonies in Delhi such as Krishna Nagar in East Delhi that was completed as early as in 1949. Since then, the company has developed many well known urban colonies in Delhi, including South Extension, Greater Kailash, Kailash Colony and Hauz Khas. However, following the passage of the Delhi Development Act in 1957, the state assumed control of real estate development activities in Delhi, which resulted in restrictions on private real estate colony development. As a result, DLF commenced acquiring land outside the areas controlled by the Delhi Development Authority (DDA), particularly in Gurgaon.
1.6.4 In the initial years of 1980s, DLF Universal Limited obtained its first licence from the State Government of Haryana and commenced development of the 'DLF City' in Gurgaon, Haryana. In the year 1985, DLF Group initiated plotted development, sold first plot in Gurgaon, Haryana and consolidated development of DLF City for township development. In 1991, construction of the DLF Group's first office complex, 'DLF Centre', began at New Delhi and in 1993; completion of the DLF Group's condominium project, 'Silver Oaks', at DLF City, Gurgaon, Haryana was accomplished.
1.6.5 In 1996 'DLF Corporate Park', DLF Group's first office complex at DLF City, Gurgaon, Haryana was built and in 1999 DLF golf course was developed. The DLF Group ventured into retail development in Gurgaon, Haryana in 2002 and in the same year DLF ventured into the commencement of operation of 'DT Cinemas' at Gurgaon, Haryana. DLF undertook development of 'DLF Cyber city', an integrated IT park measuring approximately 90 acres at Gurgaon, Haryana in the year 2004. In the year 2005, DLF acquired 16.62 acres (approx) of mill land in Mumbai.
1.6.6 DLF in course of expansion of its business has entered into JV with Laying O'Rourke (one of Europe's largest construction company). DLF has also entered into various Mous, joint ventures and partnerships with other concerns like WSP Group Acquisition, Feedback Ventures, Nakheel LLC, a leading property developer in UAE, Prudential Insurance, MG Group, HSIIDC, Fraport AG Frankfurt Airport Services etc.
1.6.7 The company was listed on July 5, 2007 and is at present listed on NSE and BSE.
Haryana Urban Development Authority
1.6.8 Haryana Urban Development Authority (HUDA) is a statutory body under Haryana Urban Development Authority Act, 1977. The precursor of HUDA was the Urban Estates Department (U.E.D.) which was established in the year 1962. It used to look after the work relating to planned development of urban areas and it functioned under the aegis of the Town & Country Planning Department. Its functioning was regulated by the Punjab Urban Estates Development and Regulations Act, 1964 and the rules made there under and the various development activities used to be carried out by different departments of the State Government such as PWD (B & R), Public Health, Haryana State Electricity Board etc. In order to bring more coordination, to raise resources from various lending institutions and to effectively achieve goals of planned urban development it was felt that the Department of Urban Estates should be converted into such a body which could take up all the development activities itself and provide various facilities in the Urban Estates expeditiously. Consequently the Haryana Urban Development Authority came into existence on 13.01.1977 under the Haryana Urban Development Authority Act, 1977 to take over work, responsibilities hither to being handled by individual Government departments. The functions of Haryana Urban Development Authority, interalia, are:
a. To promote and secure development of urban areas in a systematic and planned way with the power to acquire sell and dispose of property, both movable and immovable.
b. Use this so acquired land for residential, industrial, recreational and commercial purpose.
c. To make available developed land to Haryana Housing Board and other bodies for providing houses...
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