There is a common modus operandi that fraud real estate builders perform to con investors. In this post, you will get to know in detail about the way builders scam home buyers. And, the best part is that the investors will not realize about the scam; even till the end!
- It all starts when a builder finds a piece of land that is up for grabs. A plan will be drawn and then the Intimation of Disapproval (IOD) will be acquired. IOD is a vital permission that has to be procured by the Building Proposal Department of BMC. The municipal authorities issue the IOD after stating some terms and conditions. Instead of complying with these requirements, the builder starts looking for naïve buyers.
- The ‘flats’ are sold on the basis of allotment letters. The allotment letter includes details regarding the flat, payment options, maintenance charges, construction schedule, delivery dates, etc. A good amount of cash payment is accepted by the buyers who have registered for the project. Note here; there is no way that the buyer can know if the builder is double selling the flats!
- After accepting good amount of cash from several buyers, the builder invests the amount in some other projects.
- After a couple of years, the buyer notices a fraud and seeks legal help. The builder hires a lawyer who is good in evading legal/criminal liability.
- The case is dragged for several years in the court and in the end, the builder is ordered to refund the money to the buyer at 10% simple interest.
The end result of such a scam is that the buyer is satisfied with the court’s verdict and is happy to receive a refund. Due to the several years that have been wasted; with the same amount of money the buyer can now afford to buy 1BHK instead of 3BHK.
The end result for the builder is that the same plot of land is now worth 3-4 times the price. Also, the builder earned plenty of money in form of interest that was acquired on the cash accepted from the buyers. Builder even secured cheap finance for other projects at the rate of 10% (as the court ordered to pay 10%) instead of 24% (the interest rate of unsecured borrowing).
With this modus operandi, builders are filling their bank balances and the naïve buyers are losing hard-earned money. So, beware buyers!
This is the continuation or second part of the topic “beware home buyers”… you can read the first part here… HOW DO REAL ESTATE DEVELOPERS CHEAT BUYERS?