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Petition 18 & 19 / 2010

Petition 18 & 19 / 2010. In front of Competition Commission of India By Park Place Residents Welfare Association Belaire Owners Association. Jones Lang Lasalle Report and Active Stock. Various Definitions of Active Stock. Developer A vs. Developer B. Active Stock of A & B.

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Petition 18 & 19 / 2010

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  1. Petition 18 & 19 / 2010 In front of Competition Commission of India By Park Place Residents Welfare Association Belaire Owners Association

  2. Jones Lang Lasalle Report and Active Stock

  3. Various Definitions of Active Stock

  4. Developer A vs. Developer B

  5. Active Stock of A & B

  6. Market Share of A & B Real Market Share for A = 14%, B = 86%

  7. 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? Active Stock is a flawed concept and must be rejected. DG and Petitioner have Market Share estimates based on public and verifiable data.

  8. JLL 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. Jones Lang LaSalle & DLF

  9. Genesis Report

  10. Sector Background • Market Definition • Product Market • Geographic Market • Assessment of Dominance • Assessment of Market Share • Size & Resources of the Enterprise • Size & Resources of the Competitors • Commercial advantages over Competitors • Vertical integration of the Enterprises • Dependence of consumers on the Enterprise • Monopoly or Dominant position through Statute • Entry barriers • Market Structure & Size of the Market • Social Obligations & Social Costs • Conclusion on Dominance • Behavioral Economics

  11. Perception of most corrupt industries 2. Sector Background

  12. Modus Operandi of Developers Current Model Is Model should be 2. Sector Background

  13. Genesis Report says… … despite the fact that there does not exist any clear demarcation as to how the flats should be categorized… 3.1 Product Market How about checking the DLF web-site?

  14. 3.1 Product Market

  15. 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 ft 3.1 Product Market Luxury Segment starts from Rs. 7000 per sq ft

  16. 4. Assessment of Dominance DLF Annual Report 2007-08 Page 40 We are dominant but now we want to change our mind

  17. 4.1 Assessment of Market Share DLF Analyst Presentation May 2008 I am largest but don’t know my Market Share

  18. 4.1 Assessment of Market Share DLF Market Share 55%. Unitech Market Share is 22%.

  19. 4.1 Assessment of Market Share DLF Market Share 57%. Unitech Market Share is 19%.

  20. 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 Gurgaon • So, 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 Assessment of Market Share

  21. 4.2 Size & Resources of the Enterprise DLF web-site May 2011 Largest company would have largest resources

  22. Genesis Report says… … (DLF) its profits and income are comparable to Unitech… 4.3 Size & Importance of Competitors DLF’s PAT is 4.7 times that of Unitech in 2007-08 and 2.6 times in 2009-10

  23. 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. 4.4 Commercial Advantages over Competitors DLF Red Herring Prospectus Page 68

  24. 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 Vertical Integration of the Enterprises DLF’s Vertical & Horizontal Integration is unmatched

  25. 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 Dependence of Consumers on the Enterprise Common perception is - you can’t go wrong with DLF

  26. 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 Monopoly acquired by any Statute DLF has monopoly without statute in Gurgaon

  27. Genesis Report says… 132. … but developing more than one project is unlikely to result in any additional economies of scale. 4.8 Entry Barriers DLF Red Herring Prospectus Page 44

  28. 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 4.11 Conclusion on Dominance

  29. 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. Behavioral Economics -Us Because of all of the Above, companies make fool of us.

  30. 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. Behavioral Economics - DLF Let the property prices go up. Everything will be OK.

  31. 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. Fixing Abusive Clauses Amend the contract. Break the DLF code of delay.

  32. 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 Abusive Clauses Give 20.88 Acres and 38.56 Acres to these GHS or

  33. Phase V (463 Acres includes Aralias, Magnolias and several other buildings in Phase V) 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 Park Place should be 38.56 6.1 Main Abusive Clauses Belaire should be 20.88 Belaire is 6.67 Park Place is 12.67 .. make Phase V as one big GHS with land rights to all

  34. FAR Approval for Belaire from DTCP to DLF Dated 6.8.2009 6.1 Main Abusive Clauses 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.

  35. FAR • We want to know - What have we bought? • Have I bought an Apartment in a Group Housing Scheme called “The Belaire” or “The Park Place”? OR • 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 Abusive Clauses Belaire and Park Place must get 20.88 & 38.56 Acres instead of 6.67 & 12.67 Acres respectively

  36. 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 Abusive Clauses There is an endless list of violations on clearances

  37. 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 floors • So called Construction Linked Plan has been based on 19 floors only. Payments collected, forfeiture done on this basis 6.2 Main Abusive Clauses There is a reason why DLF always discusses Belaire case

  38. No clearances NCDRC Judgment on Kamal Sood vs. DLF April 20, 2007 6.2 Main Abusive Clauses DLF’s response to DG’s Report on issues related lack of clearances before selling apartments Supreme Court directive on Stay on Compensation Part Direct that all approvals be appended to the Agreement

  39. DLF’s response to DG’s Report Delay DLF’s response to DG’s Report 6.3 Main Abusive Clauses Belaire Apartment Agreement, Page 11 Is there a delay or not?

  40. 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 same 6.3 Main Abusive Clauses In Payment and in Delivery – Time must be of essence

  41. 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 calculations 6.4 Main Abusive Clauses DLF sold 3.33 Lakh Sq Ft and Rs. 216 Crores of AIR!

  42. 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 Main Abusive Clauses Such clauses must be deleted from the Agreement

  43. 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 Abusive Clauses DLF’s letter to one of the Apartment Allottee

  44. 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 Main Abusive Clauses BR-III Approval by DTCP for Belaire dated 6-8-2009 Parking must be included in Super Area as per Law

  45. Benefit of Abuse to DLF It is a 4143 Crore issue!

  46. 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 Breaking the DLF Code Lock entire 450 Acres of Phase V land till this settles

  47. 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 What do we want?

  48. 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

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