Buying a home is monumental for any individual - be it a starter home, or the ultimate luxury apartment. Buying a home need not just be a huge monetary investment, but also emotional and physical currency, that lets you do the legwork to find yourself the perfect fit. But imagine being swindled by a developer or a broker, only to lose all your money, and your home too. As frightening as the thought is, property fraud is the dark reality of the real estate sector. It exists and is kept alive by ill practices condoned by fraudulent developers, real estate brokers and even unverified money lenders. As the sector continues to grow, the scope for scams and illegal transactions widens too. A national daily reports that over five thousand homebuyers were cheated out of approximately ₹3,600 crores in about 123 mass housing frauds in Mumbai, from the year 2016 onwards. The data was brought forward by the Mumbai Police's Economic Offenses Wing. If such is the state in the country's financial capital, other metropolitans and tier-two cities and towns are unlikely to fare better.

The onus on keeping our investments safe and legitimate also falls on us. It becomes doubly painful because records show that judicial action in cases of property fraud is particularly taxing and long-drawn, getting the best of common money real estate investors. For the larger part of the decade, there was a keen absence of a watchdog in the real estate sector. However, post the implementation of the Real Estate (Regulation and Development) Act, swindling developers have been kept at bay. But despite that property fraud is rampant indicating that awareness and vigilance is the strongest antidote to the menace.

This article dwells on the phenomenon of property fraud - its types, and its preventions. In a bid to prevent and alert homebuyers, let's take a microscopic view into the vast possibilities of property fraud.

WHAT IS PROPERTY FRAUD?

An accurate definition of fraud would be a false representation of facts and truths. This can be conducted by concealing facts or distorting and withholding information. While fraud can be committed in any area of business, we will be looking at property fraud particularly.

Property fraud would mean deceiving a home buyer and investor into buying a property that doesn't have a clear legal title, or by cheating them out of their money under the pretext of selling a property. Several types of property frauds and cons have overtime refined their ways to make their crime less conspicuous.

TYPES OF PROPERTY FRAUD

1. FALSE PROMISES

In a bid to lure in more buyers, in a market that is so immensely fierce and competitive, developers can and do often resort to making exaggerated, false promises that inflate the value of the property than what it actually is, in reality, and get buyers to make a downpayment in the initial phase of the housing project. This could mean several things. Many developers make lofty promises of guaranteed returns of investment, until possession. Some even claim to offer freebies that come along with the new house (electronic goods like a water heater, air conditioners etc) and amenities that don't materialize after possession.

2. TITLE FRAUD

Title fraud is possibly the most serious form of property fraud, that endangers the home owner's legal ownership rights and claim over their rightful house. Statistics report that the most common form of property fraud committed in India is title fraud. In this scenario, the homebuyer is made to sign a duplicate sale deed, unbeknownst to them, leaving them completely exposed to the possibility of not being the sole owners of the property. Developers can sell the same property to another party, committing title fraud.

By the time the fraud has been detected, the developer is likely to have fled the city with all the payments that have been collected from the investors.

3. DEVIATION FROM APPROVED PROJECT PLAN

In a complete breach of the homebuyer's trust and sale agreement, many developers change the project layout from what was initially promised, during the time of construction. Developers often promise attractive amenities like swimming pools, clubhouses to draw more crowds. However, at the time of possession, many homebuyers report that none of these constructions was made. It is to be noted that many developers even charge an extra fee for homes that are swimming pool facing or park facing. After possession, there's very little the homebuyer can do about the changed layouts.

The same deviation from approved layouts can be seen within the apartment unit as well. Developers make promises of an extra balcony or an enlarged living room but often default on these promises, during construction.

4. ENCROACHMENT

Apart from title fraud, another grave form of property fraud is encroachment. In such cases, the developer encroaches on land that is not legally assigned to them for construction and deliberately continues the project and keeps the homebuyers in the dark, regarding this detail. What this means is that later, when the homebuyer begins living in this house, they too are living on the encroached property, that is illegal in the eyes of Indian law. And because the home is now in the name of the homeowner, the investor cannot claim money from the developer for the fraud.

5. DUBIOUS AGREEMENTS

Dishonest developers or real estate brokers can often bungle up the registration by giving the homebuyer counterfeit and fake documents. Starting from NOCs to the actual sale deed, reports state that developers have been known to forge every document. By getting these documents signed, the developer or agent effectively washes their hands off the transaction and bears no responsibility for what happens to the property next. This also means that they hold no liability to remain answerable to the homeowners.

6. ASSURED RENTAL RETURNS

To keep at par with their competitors, developers are scampering to offer investors attractive deals and gimmicks. One of the most common one buying assured rental returns on the under-construction property, till the homebuyer receives possession. And some even promise a steady rental income, after possession. While many investors get fooled by the data put forward by the builders, it's imperative to mention that more often than not, the rental listings have been manipulated with, to reflected the highest amount, to draw in more homebuyers. Many find, that after possession, the rental yield if at all is not up to the mark, the builder had initially promised them.

7. DELAYED POSSESSION

While the advent of RERA has helped regularize rogue developers that delay possession, to say that the problem is completely over is still far fetched. One of the biggest worries for a homebuyer is the continuous delay of the final position date. Developers often credit the delay to the delay in getting approvals from various civic authorities, but that too is something that should have been managed by good paperwork. At this point, the homebuyer will find themselves stranded because most of the money would have already been paid to the developer by that point.

HOW TO PREVENT PROPERTY FRAUD

While property fraud is rampant, it isn't inevitable. Scores of people successfully buy their homes without mishaps and continue to reside in them with no legal trouble. We've put together a cardinal checklist, so every homebuyer can tick each other, ensuring a safe and verified homebuying process. For a more detailed breakdown, take a look here.

• Hire a legal advisor - Having a legal advisor to look over documents and guide you through a clean property purchase is imperative. Not only will you be well guarded and informed, but your legal advisor will also act as a sieve against counterfeit and dubious documents.
• Do your research - Don't rely only on hearsay and advertisements. Buying a home is no small feat and the time and effort put into buying one should match up. Research the developer you are interested and check their track record. If they are known to default on their contracts, stay clear of them.
• Seek personal references - Research doesn't just end at a manual background check. Try and speak to homeowners who have bought homes in the project you are interested in. From this, you can gauge if the developer is honest and credible and then go ahead with your booking.
• Choose bank approved loans ONLY - Not all acts of fraud are committed by the developer. Local NBFCs and moneylenders too can take you for a ride. If you are opting for a home loan, ensure that you opt for the banking services of registered banks that offer loans for the project of your choice. This would also work as a dual recognition of the legitimacy of the project you are interested in.
• Opt for a RERA registered property ONLY - The Real Estate Regulation and Development Act ensures that every project registered with them abides by the given set of norms of construction, possession, payment and other details. RERA also provides the home buyer with a redressal system, wherein they can file a complaint against an erring developer. So in case you have been duped, or the project's possession date has been delayed, you can go to the authorities and demand a penalty.
• Maintain a document checklist - Signing the correct documents makes up 50% of the transaction. We've put together the ultimate document checklist here, for your perusal.
• Look over the Sale Deed in detail - A Sale Deed is proof of your property ownership. It is a legally valid document that outlines every detail of your transaction and the terms and conditions of the sale. This document is signed by both the buyer and the seller in this case, the developer or their legal representatives in the presence of at least two witnesses. Ensure that every detail of this document is looked over by your legal counsel and is an original draft. We have outlined all the ways a Sale Deed can safeguard you at the time of registration.