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