Real estate property is a precious asset that possesses long-term financial value and security. However, the process of purchasing a property can be expensive and cumbersome. The duration of a property transaction may extend for several months and allocating funds for the sole purpose of the purchase comes at a steep cost of lost opportunity. It is for this reason that at times buyers seek to exploit “shortcuts”. And fraudsters seek to exploit this trait of buyers.
In India, Courts of Law are reeling under a phenomenal number of real estate litigation cases because of the high incidence of fraud and deception when it comes to property transactions. This leads to buyers being defrauded of their life savings or being saddled with substantial losses and liabilities. The Real Estate (Regulation and Development) Act, 2016 has provisions that deal with fraud and check the incidence of bogus deals made with the intent of defrauding homebuyers. This article seeks to highlight the types of property fraud and explain some facts about them.
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Types of Property Fraud
Here is a list of some types of property fraud in India:
Fraud in matters of title:
In a property transaction, a buyer pays monetary consideration to a seller for ownership rights and possession of the residential property. It is monetary consideration in exchange for the title in the property. However, when the title or ownership of the property is unclear or has a defect, problems begin.
- Fraudsters posing as house owners or sellers forge property papers or create duplicates to show themselves as owners and then “deal” with naive homebuyers who fall into their trap and end up buying a property with a fake title on a bonafide basis.
- There is a legal maxim “Nemo dat quod non habet” which means that “no one can transfer a better title than what he himself possesses. It means that if a defective title is transferred to a person who has purchased the title in good faith, the defect persists in such title despite being purchased for genuine consideration.
- Fraudsters use property that is unoccupied for a long or property that has owners settled abroad or property which are unoccupied due to prior disputes or pending dues. They show these properties to homebuyers and peddle lies about their ownership and title to ignorant buyers.
Fraud committed due to fake hype:
Some developers create a fake hype where in order to sell their remaining flats in their construction projects, they create an urge among buyers to purchase their “exclusive” or “attractive” properties. The buyers rush in to buy the remaining flats without conducting the necessary background checks and end up buying these properties at very high prices.
High return fraud:
There are frauds where some property developers promise handsome returns upon the property until the time of taking possession. These promises are subject to the investor making an immediate investment. The developers may also offer post-dated cheques to keep up their charade. It is only after a time, the investors realize that the cheques are fake when the cheques start bouncing.
Delayed possession fraud:
There are instances where buyers invest lakhs of rupees in property and purchase properties only to find themselves waiting for years to take possession despite completion of the project. There are provisions of RERA where it is provided that builders or developers need to appraise on the RERA website about the progress of the building project and the date of taking possession.
Fraud of selling a property unit twice:
This is another common type of fraud that occurs when a developer or builder sells one flat to two people defrauding them in the process. These types of issues are hard to resolve because there are two buyers involved who have claims on the title of the property. A buyer has to face several legal hurdles when changing the title of the property or his or her name.
Several times, builders omit or intentionally fail to reveal material facts about a property to a homebuyer and may misrepresent facts also. This is fraudulent and goes against the tenets of contract laws and the RERA provisions. There are penalties prescribed in RERA against such criminal non-disclosure tactics practiced by some builders and developers to defraud homebuyers into buying property.
Some property developers sell the residential property to homebuyers only to forcefully cancel the sale after some time citing vague reasons. This causes the buyer tremendous loss as s/he is neither in a position to take possession of the house nor has the means to litigate against the builder.
Some builders after developing property for a certain amount of time suddenly change their plans about further pursuing such construction. Buyers who have invested in under-construction properties take a huge hit and suffer massive loss.
There may be projects in which buyers have invested only to find that the building project has pending approvals or is built illegally or has violating zoning regulations or environment norms etc. This leaves them either with delayed possession until the matter is resolved or in a cruel twist of legal action bereft of property.
Property frauds are uncommonly common in India. It means that there are so many varieties of these frauds and scams that despite their occurrence, they transpire in novel ways. Buyers are simply not equipped to face these fraudsters. It is for this reason that the Rera provisions were introduced in 2016 to deal with these issues of fraudsters and instances of bogus deals. Buyers however cannot rest only on the law to deal with this menace.
They need to exercise due diligence, extreme caution and gather information on the background of the developer or builder before entering into a deal with the developers or builders. Dealing with a developer or builder through a real estate agent is a good idea for such an agent may reach out to his or her contacts to conduct a background check on the developer and verify the credentials of such a developer. However, you need to ensure that a real estate agent is registered with the RERA Authority to ensure that his or her services are genuine.