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CCI wing suggests model real estate regulations

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The investigation wing of the Competition Commission of India (CCI) has suggested forming model regulations to safeguard customers from discriminatory treatment.

It has cited examples of building regulations from at least eight developed nations to point out how the absence of proper regulations are helping the real estate industry to frame clauses that are against consumer interest.

The observations of the director general (investigations) are part of his internal report to on complaints raised by some customers of real estate major DLF. The customers had alleged that the company had “abused” its “dominant position” by putting “discriminatory and abusive clauses” in the apartment agreements provided to the allottees of the and projects in Gurgaon, Haryana.

The DG report points out several instances where construction was started by real estate players before they received actual approvals from government bodies like town planning departments.

The report takes note of the real estate building procedure of countries such as Belgium, Denmark, England, France, Germany, the Netherlands, Norway and Sweden to highlight the common conditions that are in place as consumer safeguards.

It says that in most of these countries, the title of the land has to be clear and fully paid up before any property is allowed to be placed in the market for sale. Similarly, approvals of building plans and valuation of the financial status of the builder are prerequisites.

Even when the builder announces a project, the real estate firm will have to specify the rates for sale of covered area. No super areas or hidden cost will be allowed later.

The DG report also notes that most European laws permit a customer to book the apartment with a payment of 10 per cent as the booking amount. All payments and receipts towards the project are deposited in escrow accounts exclusively attributed to the project and these funds cannot be shifted around. Similarly, the final settlement takes place only after the property is delivered and the consumer is given a three-month “live-in” period to draw up a list of faults and defects to be cleared by the developer.

The reports recommend CCI to engage the Ministry of Housing and Urban Poverty Alleviation, Ministry of Urban Development and all state governments to come out with model real estate laws that stipulates similar conditions for the benefit of the consumer.

The DG’s investigation report is an internal document and the final decision is taken by CCI after its assesses the report.

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