CCI removes abusive conditions from DLF agreements

Shares in DLF, India's biggest listed real estate developer, declined 2 per cent today following a  ruling by competition watchdog Competition Commission of India (CCI) that is widely expected to change the business model in the real estate sector.

In two of DLF's projects, the CII yesterday modified "the apartment buyer agreement" between DLF and buyers to remove the "abusive and unfair conditions present in the original one-sided agreement".

The modifications are aimed at making the builder-buyer agreement more equitable for buyers. Under the new agreement, developers would not be able to construct beyond the approved building plan and would also not enjoy sole ownership of open spaces.

The move by the competition regulator came on a direction from the Competition Appellate Tribunal (COMPAT), where DLF had challenged a penalty of Rs630 crore imposed on it by CCI in 2011. The realty major was fined Rs630 crore in August 2011 after the CCI found that the company had abused its dominant position (See: Commission imposes Rs 630 crore fine on DLF).

CCI chairman Ashok Chawla has said the modified agreement in the DLF case could work as a model framework for commercial agreements between real estate developers and property buyers and could serve as a benchmark for the industry.

The CCI found at least 16 sub-clauses, abusive and unfair had them deleted. The ''overall architecture of the agreement had been changed,'' according to the commission, which changed the pact at the instance of the Competition Appelate Tribunal (Compat). The next hearing of Compat is set for 9 January.