As the real estate market grows, the figures of scammers and frauds are increasing simultaneously. Investors invest in real estate for a better secure future, as real estate is considered the most valuable asset. What are Real Estate Scams? Scams occur when an investor invests in the wrong place, and their investment becomes vulnerable and exposed to stealing. Scams happen due to the ignorance of buyers before investing and blindly trusting scammers. The real-Estate market involves high risk and high prices with a lack of security. Lacking security makes it a vulnerable and easy target for scammers. The most common scams are misrepresentation, Escrowwire fraud and unclear mortgages. Misrepresentation means an intentional presentation of inaccurate information. Investors who make haste in making a decision and fall easily into the fabricated word of the seller or get fooled by the scammer’s fake profiles are likely to get scammed the most. Not doing enough research also causes the scam; investing without inspecting may increase the chances of getting scammed. Scammers use fake Advertisements, phishing emails, and calls to spoof investors. This kind of trickery is called Escrow wire fraud.

Types of Real Estate Frauds

• Title Deception 

Title deception means unclear mentioning of ownership; this includes counterfeit documentation, not providing providence title to the owner, or selling a property without authorisation. Even if the residence address or name of the previous owner or buyer is indecipherable, it may cause trouble in future. Selling under construction properties, unoccupied property, property on which a dispute is going or properties owned by a person living abroad fall under the title deception scam. In the case of title deception, convicts get arrested under section 420 in the Indian panel code.

• Hurried sales 

If a seller hurries in the selling of property by making fake promises or persuades to buy a house in haste by saying only a few flats are left, there’s a possibility that they might be scamming you by hiding facts.

• Misrepresentation 

Misrepresentation can also be called fraud, as builders or sellers might be giving you something else while promising you something else. Changing a plane without intimating the investor can also be part of the scam.  

• Delaying in handing over the possession 

Under the RERA Act, the owner can send a legal notice to the builder if a builder delays handing over the property to the owner. Also, delaying the possession will cause the builder to pay the owner 10% of the interest on the property’s value. Delaying is a part of fraud; procrastinating the date scammers may formalise a plan to abscond.

• Selling without proper authorisation

A CLU is an authorised signatory certificate that is authorised by the competent authority of the state or union territory government; A CLU certificate is needed to turn land into a commercial or residential body. If a seller doesn’t have a CLU certificate, there’s a possibility that he might be running a scam.

• Unclear Mortgage

There are many cases wherein the seller has not cleared the mortgage before transferring the house to the buyer. Any misrepresentation of information or documentation is considered mortgage fraud. Clearing the previous mortgage is necessary for the seller before selling the property.  

• Encroachment

Check if the property’s features match the parameters set by the government or not. Check the papers cautiously, then only invest in the property, land may fall under the jurisdiction, and henceforth, encroachment will be inevitable. To avoid encroachment or facing any legal issue in future, it is required to cross-check the papers before investing. 

• Selling a single unit to multiple buyers

Imagine ending up in a situation where multiple buyers claim the same property, and every investor has paid different amounts for claiming it; these kinds of scams occur when a scammer sells a single property to various investors. To avoid the occurrence of this inspection it is necessary to check if the seller is genuine or not.

Most Talked Real Estate Frauds in India

• Emaar properties scam of 2003  

In 2003, Emaar Properties Dubai-based real estate Development Company entered into a deal with APIIC (Andhra Pradesh Industrial Infrastructure Institute). The scheme includes building a high-end township on 500 acres in Gachibowli (Telangana). According to the deal, 75% of the equity will be owned by Emaar Properties, and the rest will be given to the AIIC. In the year 2006, another Dubai-based real estate company called MGF joined the party and entered into the deal with Emaar Properties. This event diminished the equity rate of APIIC from 25% to 6.5%. BP Acharya, the former managing director of APIIC, sectioned the revised terms instead of taking clearance from the government. CBI alleged that the new agreement between Emaar and MGF would’ve scammed Rs 25 crore. Later, he got suspended because of this case. 

Even after a decade, more than 100 buyers are knocking on the door of NCLT (National Company Law Tribunal) in the hopes of getting a refund.

• Karnataka Waqf board scam

In 2012, Manippady, The Chairman of the Minority Commission, dug up the scam of Rs 2.3 lakh crore. In his 7000-page report, he claimed that WQAF has encroached on around 54000 Acres of property and illegally transferred it to private institutions. The conspiracy was carried out by Middlemen, Politicians, and Waqf board members. The property was for a charitable purpose and to run free schools and hospitals. The report also stated that Wakf Board is controlling 27000 acres of land inappropriately without legal authorisation. 

• Adarsh scam  

Adarsh Housing Society is a 31-story building constructed for war widows and personnel of the ministry of defence. However, the occupants of the complex were bureaucrats and politicians. After the exposition of the scam, CBI and Army launched two separate investigations over the matter. Things get more complicated when the Chief Ministers’ name gets included in the matter. All the flats were meant to be given to the war widows. But flats were arrogated by the politicians.

Conclusion

The urban growth rate of India is increasing at a considerable speed. India’s urbanisation and Industrialisation growth rate has been changing drastically since the beginning of the 21st century. Because of urbanisation, people are moving from place to place in search of capital, leading to a scarcity of land shortly; as a consequence, the real estate market is booming rapidly. Henceforth investing in Real estate can be profitable. But as the Demographic rate is increasing, the crime rate is thriving expeditiously. Real-estate business is contributing to the economic growth of the country on a big margin; real estate does have a lot of opportunity and capital because of the presence of an abundance of money, the real estate market is vulnerable to scammers and opportunity seekers, inadequate amount of research and mindfulness can be fatal.