Builders or developers target consumers that are willing to buy/rent a property and they come up with creative plans that offer low rates or reduce the financial burden on the buyer which may sound enticing but after the money has been taken from the buyers, these plans turn out to be schemes in duping consumers off their money and never actually giving them what they were promised.
The Indian real estate sector is growing, and so are the scams and frauds associated with it. Consumers now-a-days are more informed, but ironically are still susceptible to scams. Real estate scams run the entire gamut, from legal frauds and fly-by-night operators to false promises and untenable buy-one-get-something-free offers.
Buying a property is a very crucial decision of the life for an individual. Thus choosing the right seller is very much important for the purchase of the flats. Also, most buyers have to avail of home loans to purchase the property for which the amount needs to be repaid along with the installment to the lender. Thus buying a disputed property may result in a major problem for the buyer if any stay arises on the project. The bank also thoroughly verifies the land records and also property documents before the approval of the loans.
What is a Real Estate Scam?
Builders or developers target consumers that are willing to buy/rent a property and they come up with creative plans that offer low rates or reduce the financial burden on the buyer which may sound enticing but after the money has been taken from the buyers, these plans turn out to be schemes in duping consumers off their money and never actually giving them what they were promised.
The real estate sector has become more regulated in the past few years but unscrupulous builders and developers still find ways to cheat people of their money and it is essential for people who buy or rent homes to be wary of tactics used by builders/developers.
Types of Real Estate Scams
1. Title Deception
Deceptive title is a case wherein, the ownership or the title of the property is not clear. In this type of fraud, an individual uses duplicate documents to sell the unit to the buyers. This generally happens when the property has been unoccupied for a long time or has dues pending since long. In the wake of rising incidents concerning the title of a property, it is imperative for the buyers to undergo title verification by an attorney or a company specialised in the matter. At times, a legal heirship certificate is also required to define the relationship of the owners. Moreover, title insurance also helps safeguard you from the encroachment errors associated with the property.
2. Rental Scams
Renting an apartment might seem easier than buying a house. However, the reports suggest else wise. According to estimates, nearly 43 percent of the tenants across the world have found fraudulent listings online, and more than five million buyers have been scammed. As a buyer, you must be extra cautious with regards to false advertisements online. You must consider this as a warning in case the person who replies to your listing refuses to meet you in person. While a good landlord makes sure to meet the prospective tenants, scammers typically do not want to meet you. Moreover, they want you to move in quickly without even seeing the property.
3. Assured Return Schemes
Oftentimes, builders advertise 10-12% returns till possession if upfront payment of a significant cost of the property is done. The returns are done by getting post-dated cheques or bank guarantees and, in most cases, the payments stop after the first few months. It has been declared as an illegal Ponzi scheme by the Securities and Exchange Board of India (SEBI). Additionally, the advent of the Banning of Unregulated Deposit Schemes Act, 2019 has come into effect which prohibits such schemes.
4. Bait and Switch Schemes
This is a deceptive sales tactic used by builders where buyers are lured in by an advertisement regarding a low-priced property but are subsequently encouraged to invest in a property that is priced higher than the one in the advertisements. The properties initially shown are mostly off the market as copied listings as mostly used for these tactics.
5. Assured Return Schemes
Oftentimes, builders advertise 10-12% returns till possession if upfront payment of a significant cost of the property is done. The returns are done by getting post-dated cheques or bank guarantees and, in most cases, the payments stop after the first few months. It has been declared as an illegal Ponzi scheme by the Securities and Exchange Board of India (SEBI). Additionally, the advent of the Banning of Unregulated Deposit Schemes Act, 2019 has come into effect which prohibits such schemes.
How to Avoid Real Estate Scams
1. Check Builder’s Background
Make sure you do your own background check and research on the builder and their credibility. Use the power of the internet and social media to your advantage. Check their completed projects list, track records and ensure that they are members of real estate bodies like CREDAI.
2. Check the Land Records
If the buyer enters into a deal to buy a plot, then, in that case, the buyer should check with the property documents thoroughly and check with the records with the municipality for the same. If the land records are found to be proper, only then that case the buyer should proceed ahead with the purchase of the land. Also, in the case of booking the flat, the borrower has the right to check with the documents before required from the real estate developer. Else the buyer can even check records in the municipality office for the same. And after confirming the same only, the buyer should move ahead with the transaction.
3. Check for the Approval of Loans
The property buyer should check whether the project has been approved or not by the bank. If the bank approves the project, it shows that the real estate developer has got the project’s approval for construction, and all the land records are clear. Thus then, in that case, there is no problem in proceeding ahead with the booking in the project.
4. Check for the Reputation of the Builder
Before booking the flat, the buyer should verify the reputation of the builder. Also, the buyer should check with the website of the builder and check if any disputes have occurred or not in the previous year’s which can be known through internet articles. Also, the financial condition of the builder should be checked to avoid stay occurring on the project.
5. Check for Co-Ownership
In case of the customer wishes to buy the plot, there should not be any hidden ownership through inheritance as it can lead to controversy in the property. At least if there is ownership, then, in that case, the land multiple owners should be disclosed by the seller during the transaction. In case of purchase of flat or even in case of plot, the multiple owners should be disclosed.