How to avoid property scams in India?

Property scams in India’s fast-paced real estate market have become increasingly common. These scams exploit buyers by promising unrealistic returns, falsifying property documents, or selling the exact property to multiple buyers. Being aware of these fraudulent schemes is essential to avoid potential losses. This guide will help you understand real estate scams and types of fraud and how to recognise and avoid them when purchasing a property.

What are Real Estate Scams?

Real estate scams involve deceitful practices in property transactions aimed at cheating buyers or investors. Scammers employ a variety of tactics, such as falsifying property titles, hiding crucial information, and creating fake listings to lure unsuspecting buyers. The consequences for victims can range from financial losses to legal troubles, making it vital for buyers to understand the nature of these scams.

Types of Real Estate Frauds

1. Title Fraud: Scammers falsify ownership documents to claim a property they do not own.

2. Forged Deed Fraud: A fraudulent deed is created to transfer ownership from the actual owner to the scammer.

3. Assured Returns: Buyers are promised a fixed return on their investment, only to find the promise is hollow.

4. Selling to Multiple Buyers: Scammers sell the same property to multiple buyers, collecting payments from each.

5. Pre-launch Scams: Developers sell properties at lower rates before obtaining necessary approvals or land rights.

6. Dubious Agreements: Agreements are manipulated to include hidden clauses that favor the seller or developer.

7. Mortgage Scams: Properties are sold without disclosing outstanding mortgages, which buyers must pay.

8. Delayed Projects: Developers promise a completion date, only to delay the project indefinitely.

9. Identification of Isolated Land: Scammers identify lands on the outskirts or in villages, often left unattended for years by rightful owners.

10. Illegal Occupation and False Claims: Scammers move onto the land, put up structures, and establish residency to claim ownership. They might even produce fake papers asserting ancestral ownership.

11. Dragging Out Legal Proceedings: Scammers leverage their connections and the slow judicial process, intentionally delaying court cases for years and putting pressure on the original owner.

Real estate township projects: A worrisome trend

Real estate township projects on the outskirts of Indian cities are increasingly viewed as significant financial traps. Targeting middle-class buyers with promises of luxurious living and lucrative investment potential, these projects often fall short of expectations.

Recent visits to certain developments reveal alarming deficiencies in infrastructure that compromise livability. For instance, township projects consisting of towering 30- to 40-story buildings are often situated in remote areas lacking essential services like grocery stores and medical facilities, rendering them nearly uninhabitable. Despite the reputation of well-known brands, many units remain unsold, with occupancy rates hovering below 10%. A large number of these properties are acquired by non-resident Indian (NRI) investors, who, enticed by marketing videos and presentations from sales teams operating abroad, have never set foot on-site to evaluate the actual living conditions.

The challenges extend beyond isolated cases; many similar township developments face the same issues. Investors frequently encounter disappointing returns, as the lack of basic amenities and reliable public transport hampers the desirability of these properties. The oversupply of flats complicates matters further, making it difficult to sell—even at a loss.

Moreover, these townships often remain under developer control for extended periods, leaving buyers burdened with maintenance fees that can be increased arbitrarily. Many also incur additional charges for facilities like clubhouses, which may take years to complete, leaving residents living amidst construction zones for decades.

Pricing practices are equally concerning. Numerous flats are sold at prices comparable to those from five years ago, yet new buyers are hit with significant expenses, including high fees for obtaining No Objection Certificates (NOCs) when attempting to sell. Typically located in gram panchayat areas, these developments fall outside municipal corporation jurisdictions, resulting in inadequate essential services.

The monopolization of services within these townships often leads to inflated prices. For instance, residents may find themselves paying exorbitant fees for basic transportation and internet services. With limited activities in the vicinity, families frequently rely on shared spaces like clubhouses and gardens for recreation.

This troubling trend is not confined to specific cities; similar experiences are reported in the National Capital Region (NCR) and Bangalore, where buyers confront the same challenges. Many investors hesitate to voice their grievances, fearing that negative feedback could hinder their ability to sell.

The growing number of township projects that fail to meet their promises raises critical questions about the future of real estate investment in India. With some prominent developers facing bankruptcy due to mismanaged townships, it’s crucial for prospective buyers to conduct thorough research and understand the implications of their investments. While there is hope that infrastructure will eventually catch up with these developments, the reality is that for many, these projects remain sources of frustration and financial strain.

5 Ways to Identify Real Estate Phishing Home Buying Scams

1. Research the Real Estate Firm: Always investigate the real estate company’s reputation. Check online reviews, speak with previous customers, and verify the company’s credentials. Reputable firms will have a solid track record and positive client feedback.

2. Be Wary of Delayed Projects: If a developer frequently delays project timelines and avoids answering your calls, it’s a red flag. Regularly follow up on the project status and, if necessary, seek legal help to address unexplained delays.

3. Verify Property Ownership: Ensure the seller has clear ownership by checking the title deed with a legal expert. Many scams involve the misrepresentation of property ownership, so knowing the actual owner can save you from future troubles.

4. Request Tangible Proofs: Demand verified and tangible proof of the property’s legitimacy, like documents approved by municipal authorities. By offering a clear, legal paper trail, written confirmations can help you avoid fraudulent activities.

5. Monitor Approval Plans: Developers sometimes alter approved plans without notifying buyers. Ensure any changes to construction plans are approved by the civic authorities to avoid purchasing a property that could face legal action or demolition.

6. Token Payment Pressure: Scammers often pressure buyers to make a token payment quickly, sometimes claiming it’s refundable. It could be a ploy to defraud if you’re being rushed to pay without sufficient information.

Essential Documents to Avoid Property Fraud

1. Title Deed: Verify the title deed to ensure the seller is the legitimate owner. This prevents issues with ownership disputes.

2. Sale Agreement: The sale agreement should outline the sale’s terms and conditions. This legally binds both parties and provides clear expectations.

3. Encumbrance Certificate: This document confirms the property is free from financial obligations like loans or mortgages.

4. Occupancy Certificate (OC): Issued by the municipal authority, this confirms that the building is legally fit for occupancy.

5. Completion Certificate: Also from municipal authorities, this document confirms the construction complies with legal and approved standards.

6. Approved Building Plan: Verify that the local authority approved the building plan and aligns with construction standards.

7. Land Use Certificate: This document ensures the land’s intended use (residential, commercial, etc.) complies with legal requirements.

8. No Objection Certificates (NOCs): Builders should obtain NOCs from water, electricity, fire, and pollution control departments.

9. Tax Receipts: Confirm that property taxes are up to date to avoid future tax liabilities.

10. Power of Attorney: If a representative sells the property on behalf of the owner, check the Power of Attorney for legal standing.

11. Society Documents: For apartments, verify the society registration, share certificate, and NOC for sale.

12. Loan Clearance Certificate: If there is a mortgage, the seller should provide a loan clearance certificate to confirm the property is debt-free.

Verifying property documents

To verify the genuineness of property documents, it’s essential to conduct thorough checks, as fraud in real estate transactions is increasingly common. Here are some practical steps to help you avoid scams:

1. Ask for Original Documents: Always request the original documents from the seller. It may indicate fraudulent intentions if they are reluctant to share these before finalising the deal.

2. Check for Errors and Inconsistencies: Review the documents for spelling mistakes or discrepancies in names, property details, or addresses. Mistakes could be red flags that the document has yet to be legally processed.

3. Title Deed Verification: Ensure the title deed is genuine by checking it at the local sub-registrar’s office. Verify that it matches the seller’s name and has no outstanding claims.

4. Encumbrance Certificate: This certificate shows any liabilities on the property, such as unpaid loans or liens. Ensure it is clear and confirm the property is debt-free.

5. Cross-check with Local Authorities: To confirm the approval of building plans, occupancy certificates, and tax receipts, consult local municipal records. Also, verify that the land use and zoning comply with regulations.

6. Online Verification Portals: Many states in India have online portals for checking property records. These include platforms like Bhoomi in Karnataka and Dharani in Telangana, where you can validate title deeds and tax payments.

7. Seek Professional Assistance: Consulting a legal expert or property lawyer for document verification can provide security against fraud.

Note: Property documents can also be verified offline to confirm their authenticity. You can visit the government offices that handle property records and compliance.

How to Avoid Getting Scammed While Buying Property

• Research Thoroughly: Investigate the property, the location, and the market trends. Verify the seller’s credentials and the property’s ownership status to avoid issues like disputed titles.

• Visit the Property: Personally inspect the property to assess its condition, the neighbourhood, and available amenities. Avoid transactions where the seller discourages inspections.

• Verify Documents: Have a legal expert review all property documents to ensure authenticity. A lawyer can identify potential loopholes and help you understand your rights.
  

• Stay Vigilant: Remain cautious if the developer pressures you to complete the sale quickly or demands large payments without full documentation.

• Make Payments Through Traceable Methods: If you make a token payment, use traceable payment methods, such as bank transfers or payment apps, which can serve as evidence in case of disputes.

• Check for Pending Disputes: Visit the local sub-registrar or revenue office to ensure no ongoing legal disputes regarding the property.

• Use a Bank Loan for Additional Verification: Banks conduct their due diligence when approving home loans, which can act as a secondary check.

Legal Recourse for Property Scam Victims

1. Civil Lawsuits: Victims can file civil suits for compensation. You may recover financial damages and, in some cases, legal fees through litigation.

2. Criminal Complaints: File a criminal complaint if you suspect forgery or fraud. This can lead to penalties, including imprisonment, for the scammer.

3. Consumer Protection Laws: Various consumer protection laws safeguard buyers’ rights. Know your rights and utilise them to seek redress in case of fraud.

4. Consult Legal Experts: Seeking advice from property law experts can provide guidance on the best course of action and improve your chances of financial recovery.

5. Direct Communication: Sometimes, sending a formal notice to the seller can expedite the return of your money. Sometimes, notifying them that you will take legal action can effectively pressure them into returning the funds.

6. Legal Channels for Refund: If the seller refuses to refund the token payment, consider filing a legal notice through a lawyer. This approach ensures that the seller is formally notified and adds credibility to your claim.

How RERA Protects Homebuyers from Property Scams

The Real Estate (Regulation and Development) Act 2016 (RERA) was established to bring accountability, transparency, and efficiency to the real estate sector. By regulating transactions between buyers and developers, RERA aims to safeguard the interests of homebuyers and build trust in the property market. Here’s how RERA helps prevent property scams:

1. Mandatory Project Registration: RERA mandates that all real estate projects of a certain size be registered with the respective state RERA authority. This requirement ensures that developers meet legal and regulatory standards before marketing their projects to buyers. Buyers can verify a project’s registration status on the RERA website to ensure they invest in a legally compliant property.

2. Transparency in Project Details: Developers must disclose critical information, such as project layout, approvals, timeline, and financial aspects when registering under RERA. This transparency allows homebuyers to make informed decisions and reduces the risk of false claims and misrepresentation.

3. Protection Against Delays: One of the primary concerns for homebuyers is delayed possession. RERA mandates that developers adhere to their promised timelines. If a developer fails to deliver the property on time, buyers are entitled to compensation or a full refund with interest, depending on the situation.

4. Regulation of Advance Payments: RERA restricts developers from collecting more than 10% of the property’s cost as an advance without signing a sale agreement. This provision prevents developers from exploiting buyers financially before finalising the deal.

5. Assurance of Quality: RERA requires developers to address structural defects and quality issues within a specified period after possession. This warranty ensures that buyers receive a property that meets the agreed-upon quality standards, protecting them from potential future costs and inconveniences.

6. Right to Information: RERA gives buyers the right to obtain transparent information on project status, approvals, and ongoing progress. This helps homebuyers stay informed and avoid being misled by inaccurate or exaggerated advertising claims or sales pitches.

7. Dispute Resolution Mechanism: RERA provides a platform for homebuyers to file complaints against developers in case of disputes or non-compliance. RERA authorities can investigate and take action, ensuring buyers have a legal avenue to address grievances without resorting to lengthy and expensive legal battles.

8. Transparency in Marketing Practices: The act enforces stricter guidelines for advertising, requiring developers to promote projects accurately and transparently. Buyers can trust that the information they receive aligns with the actual specifications, layout, and amenities promised by the developer.

Housing.com POV

Property scams are prevalent in India’s real estate market, with scammers using various tactics to lure buyers into fraudulent transactions. By conducting thorough research, verifying documents, and consulting legal experts, buyers can avoid falling victim to these schemes. Awareness and vigilance are the best defences against property scams, helping buyers make secure and informed decisions in their property purchases.

FAQs