Protecting Yourself From Builder And Real Estate Frauds
Project delays and financial irregularities are a part of the real estate industry in India. Everyone has gotten used to it all. We know that some amount of delay or a bit of lag in punctuality or postponement of possession or lack of funds on the part of the builder or real estate company is common and we have learnt how to deal with that over the years.
But what we will never get used to is that some builders or real estate companies understand it to be their right to run away with the hard earned money of investors. Yes, there are instances where the home buyer is duped by fraud builders. Some homeowners even receive eviction notices while a lot of them complain of their properties or flats being sold off to other people.
Let Us Have A Look At Such A Case That Happened In The City Of Noida
Would you believe that more than 200 families who were residing in a very prominent and popular housing society in Noida had received eviction notices from the bank? They were asked to leave the premises, which was a very shocking news for the residents who had been staying in that society for several years. According to the news, the real estate developer had obtained a loan from the bank for construction purposes by pledging the said property as mortgage. When the real estate developer failed to pay the requisite amount, the bank had to take certain steps and the first was asking that homeowners to evict the premises so that it could take possession of the property and recover its damages.
Other than this, several other cases have popped up in the past as well where the builder was accused of selling already mortgaged property to home buyers. In such a case it is the responsibility of the investor or the home buyer to ascertain the legal status of the property or any outstanding dues relating to it before they hand over their hard earned money to the seller.
Is There A Way To Ensure That Your Builder Has Not Already Mortgaged The Property You Are Going To Buy?
- As a home buyer it is your right and responsibility to know that your builder cannot mortgage any of the units that have already been sold to the dwellers. His right is limited to the unsold units.
- To find the records regarding the legal status of the property a homebuyer can approach the registrar office and find out if the builder has already mortgaged the property.
- You should also know that it is mandatory for the developer to share mortgage details with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India. This puts the homebuyer in a position to access the database and check for himself whether the property has any mortgage or outstanding payments on it or not.
- As a home buyer you can also demand a No Objection Certificate from the builder of the property. You will need a 10 rupees stamp paper for this purpose and make sure that it is notarized on time.
- Also it is in your best interest to know that as per the regulations issued by the (RERA) Real Estate Regulation (and development) Act, 2016 every builder is required to disclose the relevant details of mortgage of the property to the concerned parties before putting it up for sale.
How Can You Protect Yourself From Fraud Builders?
- You can opt for a buyer-builder agreement to protect yourself from any errant acts of builders. This agreement is typically drawn to protect the interest of the real estate developer but it can be rewritten without any delay to serve the interest of the home buyer as well.
- Other than this, you can file a police complaint as well and approach the consumer court in case you suspect that the builder would leave the project midway due to lack of finance.
- It is in your best interest to understand the developer’s financial health and the legal status of the project if the whole thing is being funded by a bank.
- You should also understand that the Indian law now recognises home buyers as financial creditors. This implies that in case of insolvency of the real estate company, home buyers would have an equal right similar to the bank and other institutional lenders. The Supreme Court of India has ruled that the clauses of the agreement will not be binding on the buyer if it is proved that they had no other option but to sign it.
When Buying Property From A Builder or Real Estate Company, Refrain From Making The Following Common Mistakes
Falling For The Claim That Last Few Units Are Available
The sales team of the property builder or real estate developer is going to show you a list of flats in the project. You will notice that 90% or more of the flats in the list have been crossed or marked as sold. This means you only have a few choices left. The objective behind this trick is to lure you into making a quick decision and investing in the property thinking that you may not get a better deal in the coming days. Avoid falling for this trick at all costs.
Believing That The Prices Will Increase In A Few Days
This trick is very effective when you want to create a sense of urgency among the customers. The home buyers are going to think that if they do not buy the property right now they will suffer huge monetary losses and therefore, the psychological pressure builds up on them and they end up buying the property in haste.
Buying The Premium Flats
If you are buying property or flat from a builder or real estate company, it is very important that you choose something that is being offered during the initial stages of development. This means you are going to be investing in flats that are not so close to completion which means you will be getting the same property, location, facilities, infrastructure and other features at a much lesser price. On the other hand, if you hope to buy the same property close to its completion, you will have to pay a premium amount for the same features.
Fake Or Dummy Customers
You must be wondering whether this is a real trick or not. As a matter of fact, this is a very effective technique which is being used by a lot of realtors especially for high value purchases. Real estate developers employ this technique when they feel that the chances of a transaction happening are rather bleak. Some fake or dummy customers are employed in the offices of these real estate developers and builders to show to potential buyers that the property that they are interested in is selling like hotcakes and it is in their best interest to speed up the transaction and invest in it as soon as possible.
Owing to tremendous development and the rising number of real estate projects in several areas of the country, the slump that we were witnessing in the property market up until now has started to recede. As a result, people are coming out of hibernation and are willing to invest money in real estate projects. But this has given rise to a lot of false claims and marketing gimmicks that might border on fraud and misrepresentation to attract more customers. As an investor it is your responsibility to choose wisely and invest your money with complete diligence.