How to Get Real about Realty

The DLF case illustrates how business groups use a maze of companies and complex transactions to withhold information from the authorities

The decision of India’s securities regulator to bar property developer DLF and its senior executives from tapping the capital market for three years is certain to act as a deterrent, but cleansing the realty sector would require setting up a regulator for it. The DLF case illustrates how business groups use a maze of companies and complex transactions to withhold material information from the authorities and capital markets.

According to Sebi, DLF failed to provide key information on subsidiaries and pending legal cases at the time of its record-breaking 2007 initial public offering. The company, which has a $3 billion burden of debt, now cannot access funds from Indian equity and bond markets. The decision impacts all its stakeholders. The heavily indebted DLF may find it difficult to complete ongoing projects. However, tough action is needed to reform a sector that has become a vast playground for well-connected individuals.

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