“Last units selling out soon, hurry and book your dream home now!” We all have come across these lines over newspapers, radio, and websites. Flashy statements like these may be exciting to readers and listeners, however, their impact might not be equally delightful as it may turn out to be a cleverly disguised property fraud waiting for a target to fall into the trap.

Property fraud refers to an illegal, fraudulent or deceptive act or conduct pertaining to purchase or sale of a real estate or creating mortgage or encumbrance over an immovable property on false promises or assurances. While purchasers’ awareness of property fraud is increasing, the types of property fraud in India continue to increase too. The simplest of acts or omissions which are not usually identifiable to buyers may turn out to be property fraud and land the buyers in deep irreparable trouble, causing huge financial losses, mortgage defaults, legal expenses and mental trauma.

This article delves into the types of property frauds in India and gives the potential buyers an insight on the preventive measures to avoid the same and safeguard their position.

5 Types of Property Frauds in India

1. Title fraud

One of the most common types of property fraud in India is title fraud. In this type of fraud, the seller tricks the purchaser into buying a property that does not have a clear title, is not owned by him by creating false ownership/power of attorney documents or by impersonating the real owner of the property. Title fraud often involves unoccupied properties, deserted properties or properties that may be under construction. Title fraud may not be detectable by the buyers until they finally move to sell the property and face difficulties or when the real owner sells the property. In a recent incident of title fraud in the Begumpur Khatola village of Gurgaon, Haryana, four individuals ganged up to manipulate government records, forge documents and sold a non-resident Indian’s plot worth INR 40 crores for a mere INR 6 crores.

2. Mortgage Fraud

Mortgage frauds involve material misstatement, misrepresentation or omissions made by borrowers in respect of immovable properties, relying upon which a lender or an underwriter agrees to lend, fund, purchase, or insure a loan by relying upon forged documentation. Sale of a mortgaged property by concealing the original records and forging documents also constitutes as a mortgage fraud. Mortgage frauds may also involve bank staff and government officials working in organised groups to defraud prospective buyers. Buyers and lenders must undertake proactive measures to verify property records, bank statements and identity of owners to ensure that the title of the property if free from all encumbrances, loans and charges.

3. Assured Returns

Offering assured returns is a common fraud prevalent in almost all industries in India. Real estate is considered as one of the best investments among Indians and what better than finding out that it comes with assured returns? As a standard market practice sellers offer about 12% – 18% returns to buyers till possession and offer them post-dated cheques as assurance. Buyers fall into this trap expecting to get great returns on their investments, however, the post-dated cheques are dishonoured when the buyers finally deposit the same for encashment. In a recent judgement , Haryana Real Estate Regulatory Authority granted reliefs to homebuyers who were promised assured returns and ordered the builder to pay the assured returns to the buyers.

4. Delays in the Handover of Possession

This is one of the most common frauds committed by real estate developers. Most buyers are put in a helpless position in case of delays in handover of possession as their investments remain stuck with the sellers without any known available recourse. However, buyers can seek a refund from the developer/seller in case of delay in the handover of possession. Recently, the Haryana Real Estate Regulatory Authority, Gurugram bench held a developer liable for forfeiture of money paid by the buyers after they cancelled their booking for a unit. The bench directed the developer/builder to refund the money paid by the buyer and reiterated their absolute right to seek a refund in case of failure of delivery of possession of the property on time .

5. Forced Cancellation

Forced cancellation is a fraud committed by builders to make profits by reselling the property at a higher rate. In this case, when the market conditions substantially improve after the property has already been sold, the builder/seller tries to get the buyer to cancel the booking or resell it at a lower price. The buyers are often threatened with project delays or cancellations without refunds.

How to Avoid Property Fraud in India?

1. Financial Viability Check

A strong financial viability check must be conducted before investing in an assured returns scheme in real estate. The builder’s financial position must be the deciding factor rather than the returns being offered.

2. Market Analysis

The buyers must analyse the real estate market, the conditions in the area where the property is situated and the demand and supply in that area to get a better understanding of the returns attached to the property.

3. Title Due Diligence

Buyers must obtain due diligence reports for the property they intend to buy. Property documents and their verified copies must be obtained and checked with the concerned department records.

4. Verification of Seller’s Identity

Verification of records does not suffice when it comes to thorough due diligence concerning a property transaction. The buyers must also verify the identities of the seller and/or the broker involved in the transaction.

5. Legal Assistance

When it comes to avoiding frauds, the most fool-proof way is to seek legal consultations and involve legal experts. Legal experts can conduct thorough due diligence to ensure that the title of property is clear, absolute and free from encumbrances/charges, transaction/purchase is free of any risks or frauds. Legal experts can analyse any loopholes in the agreements, the terms and conditions of the sale/conveyance deed and advice the buyers on the feasibility of the schemes.

Final Thoughts

Precaution is better than cure, especially when there are hefty sums involved like in case of property transactions. While the Real Estate (Regulation and Development) Act, 2016 and Consumer Protection Act, 2019, provide remedies to property buyers in certain cases of frauds, buyers must understand the implications of property fraud and undertake preventive measures to escape it. Property fraud does not merely cause financial losses and troubles but also results in hectic legal proceedings. By availing consultations and advise from legal experts for due diligence of the title of the properties, document review and background checks, buyers can avoid becoming a scapegoat for property scams and safeguard their investments.

Also Read: Filing Claim Against The Property Developer

Frequently Asked Questions

1. What are the most common types of property fraud in India?

Some common types of property fraud in India are:

  1. Delayed Possession
  2. Assured Return Schemes
  3. Title Fraud
  4. Rushed Sales
  5. Mortgage Fraud

2. How can individuals protect themselves from title fraud in India?

Individuals can protect themselves from title fraud in India by involving legal experts to conduct thorough due diligence for every aspect of the transaction from the owner’s identity to the title of the property including relevant documents and agreements.

3. What are the signs of a fake property listing?

The signs of a fake property listing include:

  1. Substantial price difference as compared to other properties in the area.
  2. No disclosure of the owner’s identity.
  3. Urgency to sell.
  4. Fake photographs/photographs of just the exteriors of the property.

4. What legal actions can victims of property fraud take in India?

  1. Police complaint at the nearest police station in the jurisdiction of the property.
  2. Complaint to the concerned Real Estate Regulatory Authority.
  3. Complaint under Consumer Protection Act, 2019 to the concerned forum.
  4. Complaints under the Insolvency and Bankruptcy Code, 2016.

5. How does due diligence help in preventing property fraud?

Due diligence helps in preventing property fraud as it may result in the revelation of undisclosed material facts. Legal advisors can verify the government records, property documents including the title documents, ownership documents, sale and purchase documents and the terms and conditions attached thereto. While these may appear as simple steps to the buyers, a holistic analysis of several factors in relation to the property, its title and transferability, conducted by legal experts helps the buyers understand the viability and soundness of the investment in relation to such property.

6. How do online property scams differ from traditional fraud?

Online property scams differ from traditional fraud as there may not be an in-person dealing between the seller, buyer and/or the broker. In an online scam, if the buyers do act with caution, they might be at greater risks of financial losses which may include hacking of bank accounts, one-time password (OTP) frauds, know your customer (KYC) and identity frauds, cyber theft and various other adverse impacts.