New Delhi: In another instance of customers wanting to exit from a realty development, several buyers at a mid-range housing development of DLF Ltd in Gurgaon on Delhi’s outskirts want to exit their bookings.
A recent poll among some 600 buyers at the New Town Heights project at Gurgaon, banded together in an online group, showed that 70% of them want DLF—India’s biggest realty firm by market value—to refund payments, of up to Rs31 lakh in some cases, because the firm has not begun construction on the project and real estate prices have crashed in the past six months.
“People are not satisfied with the value proposition,” a member of the buyer group, who asked not to be identified. “There has been a huge drop in prices of all the raw materials used for construction... Moreover, the price cut announced by DLF for its Chennai and Bangalore projects is much more than what they are offering us.”
Worry times? A DLF Ltd building in Gurgaon. Harikrishna Katragadda / Mint
DLF, which has reduced prices of apartments in Bangalore, Hyderabad and Chennai, already faces exits by as many 560 customers in a Chennai project.
New Town Heights, a residential project of DLF in sectors 90, 91 and 86 of Gurgaon, was launched in March last year as mid-range housing project with apartments selling in the Rs45-75 lakh range. The project has around 3,000 apartments, of which around 85% have been sold, according to the company.
DLF on 25 March announced a price cut of 20% for apartments in the New Town Heights project, for both existing as well as new customers. But the discount is structured in a complicated fashion and comes with conditions that do not allow customers to exit at a future date.
“We are not interested in roundabout discount,” the same member of the group said. “We want a flat 25% discount and they should consider exit plan at least for some deserving cases.” The group has written a letter to DLF asking for a refund of the amount paid by buyers to those who want to exit and a refund of the penal interest charged by DLF from customers for a delay in payment of instalments.
“Whether there is an exit clause in the buyer agreement varies from developer to developer,” said Aditi Vijayakar, executive director, residential, at realty consultancy Cushman and Wakefield. “Normally there are no exit clauses...the buyer’s agreement only has a penalty clause which says that if either the developer delays the project or if the buyer delays the payment of instalment, (either side) would have to pay a penalty.”
Across the real estate industry, if the developer has fulfilled contractual obligations, the developer is under no pressure to refund the buyers’ money. “Developers normally account for some buffer time to complete the projects because of delays that could happen... As long as the developer completes the project on time, one can’t challenge the developer,” Vijayakar said.
Buyers are also complaining that there has not been much progress in construction of the project. “We booked one-and-a-half years ago in January 2008 and since then not a stone has been laid on the site,” the buyer member said. “How can they ask me (for) money for 13-14 months without even putting a brick there?”
A majority of the buyers at the project have paid around 42% of the price of the apartment and have signed buyers’ agreements with DLF.
DLF has not come out with any exit plan for buyers at the project. “Buyers cannot compel us to refund their money,” said a company executive, on condition of anonymity because his firm is in a so-called silent period ahead of posting financial results for the year to 31 March. “There is no clause in the buyers’ agreement which says that DLF will refund the full payment if the buyer exits...buyers will have to forgo their booking amount if they want to exit.”
The DLF executive insisted the project would be completed on time in 2011. “We are doing work below the ground... We have even increased the penalty payment to the buyer in case of a delay in the project from Rs5 to Rs10 per sq. ft.”