Real estate fraud is a pertinent concern for buyers and investors and this has spiraled to unimaginable proportions these days. The maturation of Indian real estate markets over the past few years has also led to newer fraud tactics and techniques that you should be wary of. Many such frauds and scams were found out over the past few years and this has thrown up some really innovative tricks that pros in the realty sector often use to take unsuspecting and innocent investors for a ride. The Indian economy presently faces a loss of up to 66 billion rupees each year and real estate fraud takes up a prime chunk of the same, namely five percent according to studies and reports. The incidences of fraud have been on the rise by almost eight percent every year. Some of these fraudulent strategies and techniques need to be discussed and delineated carefully in order to safeguard buyers and investors from falling prey to wily realtors.
Problems related to Land Ownership
Titles of lands are not registered with the right amount of diligence and dedication in the Indian real estate market. There are no fixed rules for transaction recording and this includes mortgages, sales agreements, acquisitions, court orders and other partitions. The purchase of land is mostly recorded but there is rarely any verification of ownership for the same. The situation is further downgraded by the simple reality that India lacks an organized system of land records and titles that are digitized and archived properly. Taking a look at a 2010 incident will help you understand the pitfalls of the same. A Maharashtra resident purchased a plot which was promoted by a builder in Nagpur. He did not care to check the records of the builder and the ownership of the plot.
This Maharashtra resident shelled out a total of INR 5 lakhs for a plot of approximately 3, 200 square foot through a cheque. The land in question actually belonged to a friend of the builder who in turn, desired to sell it off to another realtor. This brings to light the fact that there are multiple fraudsters and scam wizards in this sector. This is mainly because of the fact that there are no entry based criteria or other regulations for the Indian real estate sector. According to reports and studies, real estate professionals mostly feel that presume ownership is what dictates maximum purchases of people in India. Challenges to this can take place on multiple grounds like financial obstacles, extension of boundaries and inheritance sub divisions. As per the JNNURM or Jawaharlal Nehru National Urban Renewal Mission, the reformation of titles of land in order to provide guarantees of plot ownership is an optional measure for states.
There were a few states which did initiative a process of reformation however no concrete results could actually be discovered and such schemes died a slow death in these areas. According to real estate industry experts and professionals, investors in property must do some homework of their own since there is no other solution to combating fraud at a transactional level. Investors should comprehensively study the credentials of the realtor or real estate company and also verify the actual ownership of the plot of land in question. This has to be done even more meticulously in case the buyer opts to work with properties that are priced on the lower side. Alongside, thorough investigation is also desirable if the buyer opts for local developers and realtors. There should be ample confirmation of proper purchase authorization of the plot and there should be undisputed land titles. Clarity in this aspect is a huge factor with regard to making a safe purchase. Alongside, the plot in question should have no pending dues and amounts attached to it and this is another area where careful investigation and research is necessary. The local authorities should provide full sanctions to any plot and there should be no objections or disputes lying neglected in this regard as well.
After the economic depression and slump, several real estate market players who had mushroomed rapidly, vanished all of a sudden from the market. This left a long line of buyers who had only vague purchase agreements to show for their transactions. You should always go for a real estate developer who is a CREDAI member and holds a good track record with regard to project completion and delivery. Alongside, always go for builders who have at least a few good projects under their belt. Listed developers will mostly adhere to all industry regulations and you will witness transparency in all your dealings with them. New realtors may suddenly pull off a few tricks and leave you in the lurch at crucial times.
A builder in Ranchi has been accused of swindling crores of rupees through this method while another Bhubaneshwar based developer has been indicted for real estate fraud to the tune of INR 100 crores! He accomplished this by promising budget plots to innocent customers. Loan duplicity is another key factor you have to keep in mind. Sometimes, loan duplicity can lead to a torrid situation of sorts. A Dwarka based software consultant bought an apartment in a tower which was under construction with the help of a bank home loan. Later, he found out that the apartment had been sold off to another individual who in turn, had taken a loan from another organization. The financers also initiated proceedings pertaining to the loan amount recovery against the defaulters, thereby adding to the bad nature of the situation.
The scam came to light after HDFC Bank brought out a list of about 78 flats in the entire project and confirmed that those had totally been mortgaged to the bank. The builder had scammed hundreds of investors to the tune of INR 25 lakhs and INR 35 lakhs each! Several housing companies and other banks have come under the scanner post this scam! Always be careful about information regarding developers who have been blacklisted from the HFCs or Housing Finance Corporations. There should be a DEMAT format for the agreement as well. These tips will help you avoid being taken for a ride.