New Delhi/Chennai: India’s largest real estate developer by market value, DLF Ltd, has started issuing refund cheques to buyers who bought apartments in an under-construction project in Chennai when prices were significantly higher than today.
DLF has reduced sticker prices on the Chennai development, as also at projects in Hyderabad and Bangalore, but customers who booked apartments in Garden City on Old Mahabalipuram Road, on the outskirts of Chennai, are demanding that the developer cut prices by at least 25%.
Some 561 apartment buyers have sought to exit the project in what could be the biggest exodus from a property development in India, according to a grouping of buyers. DLF had earlier said that though it had received 100-150 letters from buyers wishing to exit, the company did not expect more than 100 buyers to opt out.
Overcast outlook: A DLF project in Gurgaon. India’s property market is experiencing a downturn that has seen a 20-40% drop in valuations. Harikrishna Katragadda / Mint
The refund has been made so far to four buyers who are part of the core group of DLF’s Garden City buyer forum on Google Groups, a group run by the Internet search engine Google. Three more refund cheques are ready, but the buyers have not yet collected them, according to group members, who asked not to be named.
“I collected a refund of the booking amount I had paid, which is around Rs5.21 lakh, on Saturday,” said a design engineer who is part of the group. “DLF has given me full refund but the cheque was made in the name of Dream Castle, a direct selling agent of DLF,” he said. The refunds are being processed through DLF’s direct selling agents such as Dream Castle, buyers said. The buyer decided to exit from the project because, according to him, DLF had not reduced the price of the apartments to reflect market conditions.
As economic growth slows and bank loans become tougher to get, India’s property market is experiencing a downturn that has seen a drop of between 20% and 40% in valuations, ending a nearly four-year real estate boom.
DLF has said it will refund all buyers who seek to exit Garden City, a 3,493-apartment project, of which 1,800 apartments have been booked so far, buyers said. Buyers of the project say they have several issues with Garden City, top of which is a demand that DLF scale back prices of apartments.
DLF denies it is refunding all the buyers who have submitted exit letters. “We are not refunding as such but are just swapping existing sales with new bookings,” a DLF spokesperson said.
“We see the genuineness of the customers and then consider this option. Some people have lost their jobs and some people have got pay cuts. We verify with their employers and then consider it, if we find it true,” said DLF’s spokesperson. He said that bookings of five-six people have been swapped with those of new buyers.
When asked if this option would be given to all the people who have sent exit letters, he said, “This is not a current account that you put in the money and withdraw whenever you want to. There is nothing general or in-principle about this move. Being a big company, we emphasize on customer relationship and on humanitarian grounds, we consider their (buyers’) requests.”
An expert interpreted DLF’s move as one prompted by pending approvals for the project. “I think the only reason for developers buckling is because they don’t get approvals,” said Aditi Vijayakar, India executive director for residential services at realty consultancy Cushman and Wakefield.
“Had they got the approvals, I don’t think the stand would have been the same. A lot of developers started selling even before they got the approvals while they should have started marketing after they got the approvals. This was the industry norm during the boom time,” Vijayakar said.
The DLF spokesperson said that the company had received all approvals, the last on 13 February. DLF had started selling apartments in the project at the beginning of 2008, before it had all the approvals in place.
In March 2008, buyers of DLF’s Garden City project came together on Google Groups to negotiate with the developer on several issues. The group now has around 950 members, including a core group of around a dozen who negotiate with DLF.
On 23 February, DLF announced a price cut of 10.5-18% on the apartments from Rs2,800 per sq. ft to Rs2,500 each, from Rs3,000 to Rs2,550, and from Rs3,200 to Rs2,600 per sq. ft depending on which stage the buyer comes in. The firm is also offering a special price of Rs2,650 per sq. ft until 1 May, after which it will be revised upwards by Rs100 each sq. ft.
Many buyers, however, felt that the price cut did not go far enough and decided to exit from the project. According to a poll taken by the buyers’ forum, 561 buyers have submitted letters to DLF to exit from the project. “The number of buyers who want to exit could be much more...it could be close to 800 people,” said a second member of the core group. He, too, requested anonymity.
Members of the core group say they will continue to be a part of the buyers’ forum even after receiving their refund and that the group will not disintegrate till all the issues are addressed and people who want to exit get their refund. “We will nominate new members to lead the group but we will continue to advise them,” said the second member of the core group.
Balanathan Seetharaman, another buyer, who had booked his apartment in March 2008, says that arrangements are being made for people living overseas who have booked their apartments and wish to exit, to receive their refund amount.