Protecting homebuyers’ interests is a priority, says CCI chief
Protecting homebuyers’ interests is a priority, says CCI chiefreal estate Updated: Sep 14, 2015 15:14 IST
Ashok Chawla, chairperson, Competition Commission of India (CCI) is a distinguished civil servant with 40 years of experience in various sectors of the economy at federal and state governments in India and at international multilateral agencies. As chairperson of CCI his role involves promoting and sustaining competition in Indian markets by effectively enforcing Competition Act 2002, which is a key component of India’s economic reforms. In an interview with HT Estates, he talks about the efforts being made by CCI to tackle cases of violation of law within the real estate sector, take up issues of cartelisation among builders, role of CCI once a real estate regulator is in place and why CCI can rightly be called game-changer.
Q: Have the number of cases pertaining to the realty sector increased over the years? What kind of cases have you seen of late in general?A: After the Commission passed an order against DLF three to three-and-a-half years ago there have been many cases. (In August 2011, the regulator had found DLF violating fair trade norms and imposed a fine of Rs 630 crore following a complaint by a Belaire Owners’ Association in Gurgaon). In fact, a large number of cases (are) from the real estate sector. Not only from the NCR region but from various parts of the country. The informants or the complainants have generally been making out a case that they have been shortchanged by the real estate builders and that they have been treated in an unfair manner and this amounts to violation of the competition law by the builders concerned. We have looked at many such cases and what we find is that so far as the Competition Act is concerned there are two aspects where we can come in. One is where the builder is dominant in a certain product and a certain geographic region which means that he is able to operate independently of the competition then everything can be put through the filter of whether it is abusive or not. And that is what happened in case of DLF. If the builder is not dominant and every builder cannot be dominant – in a geographic region there can at best be only one dominant player. So for the others the same yardstick cannot be applied under the Competition Act. We also looked at, based on an information that came to us, whether builders as a group are acting in concert or in a manner among themselves and using any industry platform for the purpose. That case went through a long investigation but there was no evidence that they are operating in concert, the fact that this was arising on account ofcartelisation was not borne out. (A consumer had complained of an alleged collusion between realtors associated with the Confederation of Real Estate Developers’ Association of India but after investigation CCI let off the builders for lack of enough evidence of unfair trade practices and forming a cartel) Therefore, we had to close that matter. In the first case, the DLF case is in appeal. The COMPAT, the competition appellate tribunal, upheld the order so the opposite party is now in the Supreme Court. We will wait and watch for the decision of the Supreme Court which will determine the future road map and jurisprudence of these matters. We have taken a different position, at least in the case where the builder is dominant, so we would be keen to see how the Supreme Court reacts to the matter.
Q: You mentioned the DLF case, the Credai case. If you were to take into account these cases, do you think CCI has been a game-changer when it comes to handling real estate cases?
A: We are a game-changer in the sense that the aggrieved parties got one more forum to seek justice and probably they were happy with the course of action and steps we took proactively in perhaps much less time than what consumer courts take. So the consumers are certainly happy. There is a much larger issue which the government is fortunately pursuing - that this sector is in crying need of robust, more effective regulations and for parties to knock at the door of any court or a body like the Competition Commission is not very easy. It is a complicated process, they have to wait long. So, if many of these issues that crop up, we have seen these matters when they come to us, if they are nipped in the bud at the ex-ante stage (when they are symmetrically informed) in terms of effective enforcement of the policy and the fear in the minds of the builders and the intermediaries that if they don’t follow the act and the regulations which it prescribes then penalty can swiftly visit them. That would be very essential for the sector. That will be the ultimate game-changer.
Q: Once the regulator comes in, will CCI continue to play its present role and, will the window continue to be open to consumers?
A: Yes, it will because the regulator will look at issues of compliance and if they don’t get themselves registered, the builders and the intermediaries don’t behave in a certain manner in commercial transactions etc, in terms of taking advances, deposits etc, what they will put out and what permissions they will have etc. So, those things the regulator will look at. If the parties are aggrieved as consumers and there are purely contractual matters, they will continue to have the forum of the consumer court available to them. If there are competition issues or issues of behaviour, post the approvals because the competition act essentialy looks at behaviour or if the behaviour is appropriate or not - that option or that window will continue to be available to the consumers.
Q: Despite a spate in CCI orders, consumers are still to see results on the ground, agreements still remain similar in most cases. Has something been done about that?
A: We looked at the agreement in the DLF case also and suggested a model kind of agreement but that is frozen because the whole issue is in appeal. Once that gets settled and if the decision of the Commission is upheld and the agreement acquires legal sanctity then that will make a lot of change for customers dealing with DLF and presumably if one big builder and leader in the industry in some part of the country modifies the agreement or adopts a different agreement others will follow suit. But let me also say that while that issue remains to be decided other builders on their own have started making some changes in the terms and conditions, taking cognisance of the fact that there are active complainants and customers who are going to the Competition Commission or the consumer forum. Now that the consumer forum has also passed some very robust orders after large matters came before it, we were pleasantly surprised to find that those orders were passed in a very short period of time and was not a lengthy process. As a result I think that the community of builders generally realises that things cannot go in a manner and they have started making changes and adjustments in the commercial terms of the agreement in terms of what they will pay if there is a delay. And if there is a delay in payment from the side of the buyer, how much each will be penalised, and generally to make the terms of the commercial contract more balanced and moderate.
Q: Has consumer awareness also increased now that we are witnessing a lot of consumer activism?
A: I feel it has certainly increased. It has also increased because there are a large number of professional middle-class buyers who are putting their money into homes that they are acquiring for the first time, a lot of that money is not just hard-earned money but money they have borrowed from banks. So, there is a keen appreciation of the fact that they must get appropriate contractual conditions they can absorb and which they can accept.