The order of Competition Commission of India (CCI) has raised question marks on the role of the Haryana Urban Development Authority (HUDA) and Town and Country Planning Department (DTCP). This is seen as an indication of how both
have failed to carry out their statutory duty. Most importantly, the DLF ruling has pointed out how there is an urgent need to establish a regulator for the real estate sector.
In the case of Belaire housing project the fair-play regulator has observed, “DLF, at times, goes ahead with planning and execution of projects without first obtaining the necessary regulatory approvals from development and other authorities.”
It says the ability of DLF to launch projects without prior approvals, and make major changes midway through the projects, raises a host of issues. “It is not clear as to what is the basis of DLF’s confidence, and what gives them the risk-taking ability, to go ahead at will in anticipation of necessary approvals, and it would not be correct for the commission to speculate on the reasons for this or take into account any unverified explanations in this regard. But it is appropriate that the concerned authorities give due consideration to these issues,” the order mentions.
The order has also exposed a largely prevalent practice of builders using fund raised from buyers for other projects. In the case of DLF, the CCI says, “The deployment and use of funds, as also pricing of these products, also does not seem to be based on transparent principles or basis. These have become gang house of developers.”
It says that the money deposited by allottees of one project may well be being used for other projects/ purposes, since there is no system of keeping separate accounts or keeping the money in escrow accounts.
“Indeed, it appears that various deposits by allottees become part of a large pool of funds, which may be deployed for any purpose at the discretion of DLF, without necessarily having a linkage with the purpose for which the money was deposited. This fact assumes much greater significance in view of the huge land bank with DLF, and the large number of projects it takes across the country.”
The CCI observed that the absence of any single sectoral regulator to regulate the real estate sector in totality, so as to ensure adoption of transparent and ethical business practices and protect the consumers, has only made the “situation in the real estate sector worse”.
