The real estate sector in India is growing at a very high speed. With this rapid pace, frauds and scams associated with them are also increasing, which come to light when one goes for a housing loan. Very often when the EMIs for a home loan start but there’s no sight of the home finishing off soon, people realize the hollowness of real estate builders’ promises. Real estate scams have a huge process which include legal frauds, false promises, buy one and get something free schemes, fly by night operators etc. To avoid such scams, here are some important aspects to keep in mind and being an investor, you need to keep a look out for.
Keep an eye out for the following:
- False/Fake Promises:
With the increase in real estate, the competition has increased as well. Builders try to lure in customers or buyers with many offers to gather funds at the initial phase and fund the projects. False and fake promises are part of it. Recently, a Gurgaon-based real estate developer assured the investor of 12% returns on the money invested until the investors were given possession. Unfortunately, the cheques that were given to the investors bounced. It became worse as the investors had to face delays in projects and also the pain of their investments going down the drain. The builder was accused by more than 600 investors for embezzlement of more than 1000 crores in the project.
- Assured Rental Returns:
Many builders today market their projects by giving assurances of a fixed rental income from the properties. Some of them even publish fake rental listings of the various projects on the internet. If a potential buyer does not do his/her own research, they may be fooled or actually believe that the property they bought could be easily rented out for a fixed monthly income. But actually, once you purchase it and it is over, the rentals are pretty hard to come by, leaving the buyer in a no man’s land. And the builder just vanishes without leaving anything to catch hold of.
- Deliberate Delays:
One of most common occurrence in the real estate fraud is disappearing builders and project delays. What builders do is delay a project completion deliberately. This is done to get more numbers of buyers. While some builders put the money in other projects which delays both the projects. What investors are left with are purchase agreements and nothing more while they also pay huge amount in rentals.
- Delayed Approvals:
Out of many cases reported by the investors after they get possession are several sanctions still pending. These include utilities like electricity connection, water connection etc. Issues like building with land use violation, unauthorized layout and sub-divided plan, floor violations etc. which people get to know after construction has commenced and agreement formalities have been done could also lead to the delay. Your title registration and other approvals can also be delayed.
Tips for Real Estate Investors/Buyers:
For potential buyers who want to invest their hard earned money and years of saving in a real estate projects, no amount of caution is less. Here are some precautions that you must take while purchasing property;
- Hire a Legal Advisor:
It is good to hire a legal advisor with whom you can discuss every property-related documents before you sign with the builder. With a legal advisor, you can make sure that all the approvals are in places. If they are not in place or the builder has any partial approvals, then it is better hold on and think again in investing your money.
- Background Check of the Builders:
One of the most important points is to make sure you do a background check of the builder and his credibility. A proper research will do you no harm but also let you know the buidler’s completed and uncompleted projects, their track records and also let you know if they are the members of the CREDAI.
- Bank-approved Projects:
Chances of being a fraud projects are relatively less if the project is approved by a leading bank. Banks perform a background check on their own and duly make sure before they go ahead and become as the home financing partners.
- Get Assurances on Paper:
Get an assurance on a legal paper signed by the builder for all the amenities, utilities etc. for what you are paying for. Many builders show a lot of images and utilities on their brochure but it differs in the end from what was in the brochure. Builders include disclaimers on their brochures to the effect that all projected amenities and images are only somewhat an indication and may or may not be represented in the builders’ actual obligations to the buyer. So it is best for you to get a written assurance by the builder.
- Delay Clauses:
Before you sign on the sale agreement, make sure you have delay clauses in the agreement. It should also include construction stages, time frames and a copy of the approved plan. It is good to keep a look for progress of the project you have invested in.
So, here are the tips and precautions for everyone who is looking forward to invest their hard earned money in a real estate project. Make sure you do all your research before you think of investing in a project.