petition 18 & 19 / 2010 in front of competition commission of india by park place residents...
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Petition 18 & 19 / 2010Petition 18 & 19 / 2010
In front ofCompetition Commission of India
By
Park Place Residents Welfare Association Belaire Owners Association
1
Jones Lang Lasalle Report Jones Lang Lasalle Report and Active Stockand Active Stock
2
Various Definitions of Active StockVarious Definitions of Active Stock
S. No. Definition Description1. JLL1 Active Stock: A project which has been formally launched and has
units available for primary sale (still with developer) at the end of a particular year is considered active during that year. Active Stock is the total number of units in active projects at the end of a particular quarter/year.
2. JLL2 If the project is not completely sold out; all the units of the project are included as active stock. If a project is launched in a given year, and is sold out completely in the same year, it is still considered to be an active project for the year.
3. Genesis Calculate the market share on basis of the data of all four years 2007-2010 by taking the units of the active projects, only once, though the projects may have remained active in more than one year, so as to avoid duplication.
There a footnote (No 29) to this definition in the Genesis report, that says "However, we were unable to audit the result obtained by this exercise due to reasons of confidentiality."
3
Developer A vs. Developer BDeveloper A vs. Developer B
Project Name Q1
2006
Q2
2006
Q3
2006
Q4
2006
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Project A1 1000 800 700 650 625 575 550 530 510 500 490 440 430 410 390 380Project B1 1000 200 0 0 0 0 0 0 0 0 0 0 0 0 0 0Project B2 1000 400 100 0 0 0 0 0 0 0 0 0Project B3 1000 300 0 0 0 0 0 0Project B4 1000 900 700 0Total B 1000 200 0 0 1000 400 100 0 1000 300 0 0 1000 900 700 0
4
Active Stock of A & BActive Stock of A & B
JLL1 First Definition of Active StockJLL2 Second Definition of Active StockGenesis Third Definition of Active Stock by GenesisColumn1 JLL1 A JLL1 B JLL2 A JLL2 B Genesis A Genesis B
2006 1000 0 1000 1000 1000 10002007 1000 0 1000 1000 0 10002008 1000 0 1000 1000 0 10002009 1000 0 1000 1000 0 1000
Active Stock
5
Market Share of A & BMarket Share of A & B
JLL1 First Definition of Active StockJLL2 Second Definition of Active StockGenesis Third Definition of Active Stock by GenesisColumn1 JLL1 A JLL1 B JLL2 A JLL2 B Genesis A Genesis B
2006 100% 0% 50% 50% 50% 50%2007 100% 0% 50% 50% 0% 100%2008 100% 0% 50% 50% 0% 100%2009 100% 0% 50% 50% 0% 100%
Market Share as per Active Stock
Real Market Share for A = 14%, B = 86%
6
Flawed concept to begin with Measures Inventory rather than Sales Wide fluctuations in final output depending
upon 3 definition that have been presented No scrutiny of underlying data allowed by JLL More valid, acceptable methods already
available (Sales Revenue, Units Sold)
What is wrong with Active Stock?What is wrong with Active Stock?
Active Stock is a flawed concept and must be rejected. DG and Petitioner have Market Share estimates based on public and verifiable data.
7
Jones Lang LaSalle & DLFJones Lang LaSalle & DLFJLL has an established business relationship with DLF which they have failed to disclose to the Commission. So it is a report for an interested party by another interested party.
8
Genesis ReportGenesis Report
9
2. Sector Background3. Market Definition
i. Product Marketii. Geographic Market
4. Assessment of Dominancei. Assessment of Market Shareii. Size & Resources of the Enterpriseiii. Size & Resources of the Competitorsiv. Commercial advantages over Competitorsv. Vertical integration of the Enterprisesvi. Dependence of consumers on the Enterprisevii. Monopoly or Dominant position through Statuteviii. Entry barriersix. Market Structure & Size of the Marketx. Social Obligations & Social Costsxi. Conclusion on Dominance
5. Behavioral Economics
10
Perception of most corrupt industries
2. S
ect
or
Back
gro
un
d2
. S
ect
or
Back
gro
un
d
11
Modus Operandi of Developers2
. S
ect
or
Back
gro
un
d2
. S
ect
or
Back
gro
un
d
Current Model Is Model should be
12
Genesis Report says…… despite the fact that there does not exist any clear
demarcation as to how the flats should be categorized…
3.1
Pro
du
ct M
ark
et
3.1
Pro
du
ct M
ark
et
How about checking the DLF web-site?
13
3.1
Pro
du
ct M
ark
et
3.1
Pro
du
ct M
ark
et
14
DLF itself categorizes Belaire and Park Place in Luxury segment
Current market price of Belaire and Park Place is over Rs. 9000 per sq ft
Current “circle rate” for Gurgaon is Rs 4000 per sq ft• Good proxy for affordable housing price threshold
Genesis Report• An own-use buyer of normal residential property is
unlikely to consider luxury residential as substitutable as prices can be more than double …
A typical Luxury apartment would be at least 2000 sq ft3.1
Pro
du
ct M
ark
et
3.1
Pro
du
ct M
ark
et
Luxury Segment starts from Rs. 7000 per sq ft
15
4. A
ssess
men
t of
4. A
ssess
men
t of
Dom
inan
ceD
om
inan
ce
We are dominant but now we want to change our mind
DLF Annual Report 2007-08 Page 40
16
4.1
Ass
ess
men
t of
Mark
et
4.1
Ass
ess
men
t of
Mark
et
Sh
are
S
hare
I am largest but don’t know my Market Share
DLF Analyst Presentation May 2008
17
4.1
Ass
ess
men
t of
Mark
et
4.1
Ass
ess
men
t of
Mark
et
Sh
are
Sh
are
DLF Market Share 55%. Unitech Market Share is 22%.
18
4.1
Ass
ess
men
t of
Mark
et
4.1
Ass
ess
men
t of
Mark
et
Sh
are
Sh
are
DLF Market Share 57%. Unitech Market Share is 19%.
19
DLF states that they are DOMINANT and LARGEST on their own ‘statutory’ documents. Do we need anything more?
DG estimated DLF India Market Share to be 45-50%
Publicly known facts:They have the largest revenue in real-estate sector.They higher business concentration in NCR and then
particularly in GurgaonSo, there share in Gurgaon would be higher than their
India Share DLF’s concept of Active Stock has significant
shortcomings and is a poor attempt to confuse the issue
Petitioners with their meager resources have been able to ascertain DLF’s share to 55% to 57%4
.1 A
ssess
men
t of
Mark
et
4.1
Ass
ess
men
t of
Mark
et
Sh
are
Sh
are
20
4.2
Siz
e &
Reso
urc
es
of
the
4.2
Siz
e &
Reso
urc
es
of
the
En
terp
rise
En
terp
rise
DLF web-site May 2011
Largest company would have largest resources
21
4.3
Siz
e &
Im
port
an
ce o
f C
om
peti
tors
4.3
Siz
e &
Im
port
an
ce o
f C
om
peti
tors
DLF’s PAT is 4.7 times that of Unitech in 2007-08 and 2.6 times in 2009-10
Genesis Report says…… (DLF) its profits and income are comparable to Unitech…
22
4.4
Com
merc
ial
Ad
van
tag
es
ove
r 4
.4 C
om
merc
ial
Ad
van
tag
es
ove
r C
om
peti
tors
Com
peti
tors
DLF Red Herring Prospectus Page 68
Genesis Report says…110. In conclusion, it does not appear that DLF holds any
significant commercial advantages over its direct competitors, the large private-sector property developers.
23
Like other leading developers, DLF is also vertically integrated in terms of construction, project management, design
DLF’s level of integration in terms of Commercial, Retail, Offices is unmatched
DLF is expanding into SEZ, Infrastructure, Hotel, Leisure etc. as well
DLF’s tie-up with Hilton Hotels DLF’s presence at DT Cinemas DLF’s tie up for retailing several global
brands in India
4.5
Vert
ical
Inte
gra
tion
of
the
4.5
Vert
ical
Inte
gra
tion
of
the
En
terp
rise
sE
nte
rpri
ses
DLF’s Vertical & Horizontal Integration is unmatched
24
Consumers wants to buy a Luxury residential unit (Rs. 7000 per sq ft, 2000 sq ft space) close to his work in Gurgaon
Consumers would wants to buy something closer to preferred location of around Golf Course or on Golf Course Road
Consumers want to buy property from someone with a track record
All developers offer abusive one-sided contracts. Consumers don’t want to get burnt and hence want to stick to someone with good reputation
4.6
Dep
en
den
ce o
f C
on
sum
ers
on
th
e
4.6
Dep
en
den
ce o
f C
on
sum
ers
on
th
e
En
terp
rise
En
terp
rise
Common perception is - you can’t go wrong with DLF
25
DLF constructs CyberCity in Gurgaon. Acquires land illegally at Nathupur (Punjab & Haryana High Court)Even after loosing the case in High Court, it continues
to lease/sell the office space. There is no stay in the matter in Supreme Court
DLF violates FAR guidelines at Belaire, Park Place and at also Magnolias. No penalty from any dept.
DLF constructs 29 floors, collects money from customers under the garb of CONSTRUCTION LINKED PAYMENT PLAN and then seeks permission to construct 29 floors and gets it
Routes the Rapid Metro Gurgaon to non-existent Mall of India rather than functional Ambiance Mall
4.7
Mon
op
oly
acq
uir
ed
by
an
y 4
.7 M
on
op
oly
acq
uir
ed
by
an
y S
tatu
teS
tatu
te
DLF has monopoly without statute in Gurgaon
26
4.8
En
try
Barr
iers
4.8
En
try
Barr
iers
DLF Red Herring Prospectus Page 44
Genesis Report says…132. … but developing more than one project is unlikely to
result in any additional economies of scale.
27
DLF is dominant by its own admission DG has established DLF to have 45% to 50% Market
Share Market Share estimates by DLF/JLL based on Active
Stock are completely irrelevant because they try to exploit the DLF strategy of flushing out its inventory rather than launch a new project
Petitioner has developed a Market Share estimate of 55% based on publicly available information
DLF claims to be largest but chooses not to share its Market Share with the Commission
DLF is a very attractive builder for the consumers DLF has significant scale advantage over its competitors.
Its presence in Commercial, Retail and Residential segment gives it strong competitive advantage
Leveraging its strengths and track record, it gains unfair advantages by managing the Government machinery in its favor
4.1
1 C
on
clu
sion
on
4
.11
Con
clu
sion
on
D
om
inan
ceD
om
inan
ce
28
We are greedy. We love when property appreciates
We have limited legal understanding. FAR – what is that?
We are busy and have limited time We don’t like spending time in
courts/commissions We want to buy from developers with proven
track record We do what our friends do We don’t like when companies like DLF ill-
treat us but we would just complain to friends rather than do anything about it…
5. B
eh
avi
ora
l E
con
om
ics
-5
. B
eh
avi
ora
l E
con
om
ics
-U
sU
s
Because of all of the Above, companies make fool of us.
29
Customers like to buy from DLF in Gurgaon (all other things being equal)
We can mistreat our customers but when the property appreciates, they forget and forgive
Customers have no idea what is FAR? DTCP? Super Area? Carpet Area? Haryana Apartment Ownership Act? BR-III?
Customers seem to agree that delays in getting Government permissions is fully understandable and beyond DLF’s control
Most people challenging DLF will run out of motivation, time or money eventually
5.
Beh
avi
ora
l E
con
om
ics
- D
LF
5.
Beh
avi
ora
l E
con
om
ics
- D
LF
Let the property prices go up. Everything will be OK.
30
If DLF is found in violation of the Competition Act, our prayer is that the Agreement between DLF and Owners must be Corrected as per the Section 27(d) of the Act
Directions to DLF must be such so that even if DLF appeals to COMPAT and to Supreme Court and tries to delay the proceedings, DLF should feel the pain of this delay as well
No 3rd party rights should be allowed to be created
Under this Agreement, even if DLF would build a 100 story building in 100 years with an Apartment size of 100 sq ft, they would be compliant with the Agreement and will not pay any delay compensation!6
. F
ixin
g A
bu
sive
Cla
use
s6
. F
ixin
g A
bu
sive
Cla
use
s
Amend the contract. Break the DLF code of delay.
31
FAR DLF Position 1:• Belaire & Park Place are a Group Housing Schemes
Implication:• They must meet FAR requirements
• Set aside 20.88 Acres + 38.56 Acres for the GHS Belaire & Park Place
6.1
Main
Ab
usi
ve C
lau
ses
6.1
Main
Ab
usi
ve C
lau
ses
Give 20.88 Acres and 38.56 Acres to these GHS or
32
FAR DLF Position 2• Belaire and Park Place are Group
Housing Buildings within Group Housing Scheme of Phase V
Implication:• Our kids can swim in the
Aralias/Magnolias swimming pool and vice versa
• But then DLF violates the approval received from DTCP because it says that Community Centre is for residents only
• Proposed Horizon Centre belongs to GHSs
6.1
Main
Ab
usi
ve C
lau
ses
6.1
Main
Ab
usi
ve C
lau
ses
.. make Phase V as one big GHS with land rights to all
Phase V (463 Acres includes Aralias, Magnolias and several other buildings in Phase V)
Belaire should be
20.88
Belaire is 6.67
Park Place
should be 38.56
Park Place is 12.67
33
FAR6
.1 M
ain
Ab
usi
ve C
lau
ses
6.1
Main
Ab
usi
ve C
lau
ses
Approval for Belaire from DTCP to DLF Dated 6.8.2009
DLF’s response to DG’s Report on issues related to FAR violations that DG has confirmed
Main issue is abusive clauses in Agreement. Delete them.
34
FAR We want to know - What have we bought?
1. Have I bought an Apartment in a Group Housing Scheme called “The Belaire” or “The Park Place”?
OR2. Have I bought an Apartment in a Group Housing
Scheme called “DLF City Phase V”? DLF wants best of both worlds by forcing a
abusive contract down out throats Their game plan is:• Hoard prime Phase V land that rightfully belongs
to GHS
• Lobby to get FAR increased in future
• Further ‘milk’ the land base that is not really theirs
6.1
Main
Ab
usi
ve C
lau
ses
6.1
Main
Ab
usi
ve C
lau
ses
Belaire and Park Place must get 20.88 & 38.56 Acres instead of 6.67 & 12.67 Acres respectively
35
No clearances No developer should be allowed to
Sell/Launch any scheme without securing all the approvals
Such approvals must be necessarily appended to the Agreement for full transparency. They can’t be changed without customer’s consent
DLF has acted in a manner as if no matter what they want, it will get approved• In case, it is not, all the risk is passed to the
customer NCDRC directed DLF in Kamal Sood’s case
but they are flouting that as well
6.2
Main
Ab
usi
ve C
lau
ses
6.2
Main
Ab
usi
ve C
lau
ses
There is an endless list of violations on clearances
36
Saga of Park Place Agreement with Park Place Allottees signed
on 27.08.2007 and 12.09.2007 stated that requisite approvals are in place
DLF gets approval from DTCP only on 24.09.2007
Till date DLF has not bothered to inform Park Place Allottees that the essential character of the building has changed and it now has 29 floorsSo called Construction Linked Plan has been based
on 19 floors only. Payments collected, forfeiture done on this basis
6.2
Main
Ab
usi
ve C
lau
ses
6.2
Main
Ab
usi
ve C
lau
ses
There is a reason why DLF always discusses Belaire case
37
No clearances6
.2 M
ain
Ab
usi
ve C
lau
ses
6.2
Main
Ab
usi
ve C
lau
ses
Direct that all approvals be appended to the Agreement
NCDRC Judgment on Kamal Sood vs. DLF April 20, 2007
DLF’s response to DG’s Report on issues related lack of clearances before selling apartments
Supreme Court directive on Stay on Compensation Part
38
Delay6
.3 M
ain
Ab
usi
ve C
lau
ses
6.3
Main
Ab
usi
ve C
lau
ses
Is there a delay or not?
DLF’s response to DG’s Report
DLF’s response to DG’s Report
Belaire Apartment Agreement, Page 11
39
Delay Is there a commitment in the Agreement on
delivery of Apartment within a certain period or not?
If there is no delay, then what talk of compensation being doubled? Why would DLF pay this?
What prevents DLF from not delivering even by 2050? What would we do?
Abusive Agreement must be corrected by:• Ensuring all approvals are secured before any sale,
customers are insulated from 3rd party risk
• Clear Delivery Date is established. All up to DLF only now
• If there is delay from either side, the penalty should be same6
.3 M
ain
Ab
usi
ve C
lau
ses
6.3
Main
Ab
usi
ve C
lau
ses
In Payment and in Delivery – Time must be of essence
40
Super Area What DLF Built
• DTCP permission 147,970 Sq Meters
• 1 Sq M = 10.76 Sq Ft
• Total Built-up Area = 15.92 Lakh Sq Ft What DLF Sold
• 29 Floors X 5 towers of different floor plans
• Total Sold Area = 19.26 Lakhs At an Apartment level, the same exaggeration
is visible• Apt. (Tower D, Type 1, Belaire) Super Area 4098 Sq
Ft
• Carpet Area seems to be around 2700 Sq Ft only
• Agreement must be more transparent in these calculations6
.4 M
ain
Ab
usi
ve C
lau
ses
6.4
Main
Ab
usi
ve C
lau
ses
DLF sold 3.33 Lakh Sq Ft and Rs. 216 Crores of AIR!
41
19 floors to 29 floors Can it be justified and allowed that the
developer has a right to make such significant modifications at will?• The essential character of the entire offering has
changed. This is not what we bought
• DLF has profited while we have all suffered The clause is so open ended that they could
have built anything!As per this abusive contract, DLF could deliver us a
100 sq ft in a 100 story building in 100 years and we won’t be able to anything!
Huge gain to DLF of 875 Crores from this in Belaire and Park Place. Magnolias has the same issue.6
.5 M
ain
Ab
usi
ve C
lau
ses
6.5
Main
Ab
usi
ve C
lau
ses
Such clauses must be deleted from the Agreement
42
Cancellations & Huge Deduction Shouldn’t there be an exit clause? Is 11.3 an
exit clause? What should be a reasonable exit clause when
there are significant variations from DLF? Is it reasonable to deduct 50 Lakhs when DLF
has made significant changes to the product and has delayed
6.6
Main
Ab
usi
ve C
lau
ses
6.6
Main
Ab
usi
ve C
lau
ses
DLF’s letter to one of the Apartment Allottee
43
Parking Parking is part of Common Area
Common Area is already included in the Super Area
So why should there be separate cost for Parking?6
.7 M
ain
Ab
usi
ve C
lau
ses
6.7
Main
Ab
usi
ve C
lau
ses
BR-III Approval by DTCP for Belaire dated 6-8-2009
Parking must be included in Super Area as per Law
44
Abusive Clause & their Financial Impact In Crores)
Belaire
Park Place
FAR violation with reduced land allocated to GHSPark Place 38.56 – 12.67 = 25.89, Belaire 20.88 – 6.67 = 14.21@ Estimated value of 50 Crore per Acre
711 1294
Delay of 24 months for 19 floors planTotal sale price of Rs. 7000 psfDelay of 24 months. Cost of capital = 18%Average amount paid by Allottees = 75%
182 344
Super AreaSold when there is no built-up area corresponding to that.Calculated at Rs. 7000 per sq ft
234 381
Extra 10 FloorsBelaire (15.92L-9.65L) * (7000 – 2000)Park Place (29.40 – 18.19L) * (7000 – 2000)
314 561
Extra Parking Cost ChargesBelaire (544 Apts, 2 Parkings of Rs. 3 L Each)Park Place (1508 Apts, 2 Parkings of Rs. 3L Each)
33 90
Total 1473 2670Ben
efi
t of
Ab
use
to D
LF
Ben
efi
t of
Ab
use
to D
LF
It is a 4143 Crore issue!
45
DLF has been trying to delay the proceedings with the Commission right from the beginning
Given their pattern of behavior, we know which way are we headed
DLF code is to delay, delay and delay till we get tired out
The situation is such that any delay always works in favor of DLF but hurts us
Eventually, the customer can’t sustain anymore and gives up
We urge Commission to break this code by creating a mechanism so that dragging this on and on should hurt DLF more than us
Bre
akin
g t
he D
LF
Cod
eB
reakin
g t
he D
LF
Cod
e
Lock entire 450 Acres of Phase V land till this settles
46
We are not against DLF being a market leader or being dominant
Market leader must be responsible and shape the industry positively, e.g. Infosys in IT Services
Smaller players will follow market leader We want DLF to act more responsibly
• Stop indulging in offering abusive one-sided contracts
• Disclose all information and be transparent
• When there is a dispute try to resolve rather than tire them out in courts
Commission must direct changes in the Agreement
We believe that market will follow DLF’s lead• Will transform the industry from a ‘pack of wolves’ to
an industry that makes a billion dreams come true
Wh
at
do w
e w
an
t?W
hat
do w
e w
an
t?
47
DLF has started the entire Gurgaon phenomenon
•We thank them DLF has become a dominant player in
real-estate market
•We congratulate them DLF is abusing its dominant position and
ill-treating its customers
•We condemn them
48
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