New Delhi: India’s largest realtor, DLF Ltd, is again in the cross hairs of its customers. Buyers who had invested in the company’s commercial office project in south Delhi are demanding a refund from the developer, alleging that the project is delayed and the company has not obtained approval for the project.
The project, DLF Towers in Okhla, south Delhi, was launched in March 2008, when real estate prices were at a high and before the global slowdown hit the Indian real estate sector.
In the last one year, however, commercial rental values have fallen by around 15-30%, according to real estate consultant CB Richard Ellis.
Spread over 5 acres, the project will have three towers. Around 300 buyers had booked space in DLF Towers, which is expected to be completed by March 2011.
Long wait: The construction site for DLF Tower in Okhla, Delhi. Buyers want a reduction in line with the correction in realty prices. Rajkumar/Mint
Early this year, a group of 80 buyers formed DLF Towers Okhla Allottees Association to demand a refund on the grounds that the project is running behind schedule and on DLF’s own assurance that it will give a refund if the project does not get the required approvals within a year of booking. The association now has 232 members.
Buyers also want a reduction in price in tune with the correction in commercial realty prices. According to the association, its members have been allotted space at the project at Rs5,000-18,000 per sq. ft. The members claim that since there has been a 40-50% decline in commercial property values, DLF should give them a discount.
The firm, however, has not yet announced an exit policy for buyers of its Okhla project.
This is not the first time that DLF has been in trouble with buyers who wanted a refund on the basis that the project is delayed. Earlier, this year DLF was forced to refund money to some buyers of its Garden City project in Chennai, even after it slashed apartment prices there.
More recently, since November, DLF has been refunding money to some buyers of its New Town Heights project in Gurgaon, who had asked for a refund even though the company reduced prices by 20%.
Buyers of the Okhla project allege that DLF has not obtained a “change in land use”, which is required since a commercial project is being developed on land meant for industrial use. According to the “application for provisional allotment”, a copy of which is with Mint, the firm has said that if it is not able to allot space to buyers within a year of signing the booking form due to non-sanction of building plan, DLF will refund the payment made by buyers along with an annual interest of 9%.
“After 20 months of launching the project, there is only a deep hole dug in the ground at the site,“ said Bob Seagal, a buyer in the project. “And according to the booking form if approval is not taken within 12 months, buyers can take a refund... But DLF is not ready to give us a refund,” he said.
According to a right to information query filed by the association with the Municipal Corporation of Delhi and Delhi Development Authority in September, a copy of which is with Mint, permission has been granted to the project for construction as an “industrial project”. Building plan and layout plans have also been sanctioned for an industrial project.
A visit to the site also revealed that excavation process is going on at the site.
DLF’s spokesperson said that the firm has obtained all the required approvals and construction is in full swing at the site.
“We are committed to deliver the project on schedule as promised,” the spokesperson said. He, however, declined comment on whether the firm has paid the requisite conversion charges for getting the end-use classification changed from industrial to commercial.
According to Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, the current law does not prohibit developers from launching a project or starting construction on a project without approval. “But, this also depends from state to state. In Punjab, for instance, a developer cannot launch a project without approvals,” he clarified.
Renu Shankar, another buyer who has paid around 55% of the total amount of around Rs60 lakh, said that she realized that the land was meant for industrial use only in December, when she received the booking form.
“When we invested the money in March, the agreement was not given to us,” she said. “I was not informed about all this by the agent who sold the space... Had I known I would not have invested,” she lamented.
Following the slowdown which forced many developers to halt or delay construction of several projects due to a liquidity crunch, buyers have increasingly turned the heat on developers for failing to adhere to project construction schedules.
The country’s second largest real estate developer, Unitech Ltd, has been faced with demands for refund for its residential project Capella in Greater Noida. Another Delhi-based realtor, Vatika Ltd, is also facing a similar situation for its township project India Next in Gurgaon.