Property frauds: Nine indicators that you are about to fall into a trap


We examine certain indicators that suggest potential issues with either the property, the seller, or the underlying motives behind the transaction.

Home purchases represent the most significant financial investments for many individuals, and any mistake in this process could lead to serious and prolonged financial consequences for the buyer. That's why inexperienced buyers should exercise extreme caution when entering the real estate market to avoid falling victim to property fraud. In this discussion, we explore certain warning signs that might suggest potential issues with the property, the seller, or the underlying motives behind the transaction.

Sign no 1: The seller is in a hurry

An individual with fraudulent intentions towards a home buyer will likely seek to expedite the deal. Therefore, such behavior should be viewed as a red flag, and the buyer should exercise caution in proceeding with such transactions. However, it's essential to acknowledge that there could be legitimate reasons for a seller's urgency, such as a personal emergency. Nevertheless, for the buyer, hastily concluding a deal increases the risk of errors and should be approached with caution.

Sign no 2: The property is very cheap

The Mumbai Police's crime branch recently dismantled a scheme that offered Maharashtra Housing and Area Development Authority (MHADA) flats at rates below the market price. The crackdown ensued after a complaint from a buyer who fell victim to a Rs 12 lakh fraud, enticed by the promise of a MHADA flat in the suburbs.

Even a distressed seller is unlikely to part with their immovable asset at an unreasonably low price. Real estate is not a commodity that diminishes in value over time, retaining its potential for fetching its true worth. Therefore, deals offered at unbelievably low rates should be approached with caution.

Sign no 3: The seller is unwilling to show the property documents

The property’s documents serve to prove the owner’s rights over a real estate asset. Without examining these documents on your own and through a legal expert, you should not believe any claim regarding ownership of the property. A seller who is not genuine, would be evasive and unwilling to produce these documents.

Sign no 4: The property is located in unregulated areas

On occasion, buyers might be inclined to take the risk of purchasing a property in an unregulated area due to lower rates. However, this is not advisable, as it subjects you to the ongoing fear of jeopardizing the property title throughout your residency.

Sign no 5: Bank rejects the loan request

Applying for a home loan has its advantages, as the bank conducts thorough due diligence on the technical and legal aspects of the property. If any issues are discovered, the home loan request may be denied. This could be a clear signal that proceeding with the deal may not be advisable.

Sign no 6: The seller is abroad

Another prevalent method of deceiving home buyers involves exploiting the power of attorney (PoA) to execute property sales. In this situation, the purported representative of the non-resident Indian (NRI) seller might convey that their client cannot be physically present for the property transaction due to travel constraints. Several instances of fraud have occurred in the past, where unsuspecting buyers were misled into purchasing properties using fraudulent PoA documents.

Sign no 7: Excuses on site visit

A seller who wants to dupe you, may not allow you to visit the property at your convenience and only allow the same at their own comfort.  To ensure you are dealing with genuine sellers, make several visits to the property and get in touch with the neighbours.

Sign no 8: Demand for huge token money

An individual aiming to defraud the buyer is likely to anticipate the possibility that the buyer might uncover their scheme, leading to its collapse midway. In such cases, these sellers prioritize extracting as much token money from the buyer as possible.

Sign no 9: Assured returns

In the residential sector, developers frequently introduce interest subvention plans and 80:20 payment plan offers. In 2018, the government sanctioned the Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018, with the goal of discontinuing such schemes. It's important to note that properties with assured returns typically have significantly higher prices than comparable properties. Additionally, the income earned through such schemes is classified as income from other sources.


Also Read: Who Can Challenge a Will, How to Do So, and Other Details

Frequently Asked Questions

Ans 1. The amount of token money may vary, from being merely a token to a substantial percentage of the value of the property.

Ans 2. Under subvention schemes, a buyer can have a house, by paying as low as 5% of the property’s value and not bear the burden of EMIs till s/he gets possession of the house.

Ans 3. Figure Out Where You Want to Buy a Home And why. ... Look at the Real Estate Forecast. ... Shop around for the Best Home Loan Rates. ... Prepare for EMIs. ... Save for a Down Payment. ... Check Out Many Homes and Be Flexible. ... Get a Home Inspection. ... Check all Documents Before You Buy a Home.

Ans 4. Neighborhood. The neighborhood in which you buy will determine the types of tenants you attract and your vacancy rate. ... Property Taxes. ... Schools. ... Crime. ... Job Market. ... Amenities. ... Future Development. ... Number of Listings and Vacancies.

Ans 5. Home owners and sellers can also approach a real estate agent for an appraisal, or a valuer for a privately ordered valuation of their property at any time. Privately ordered valuations are not used by banks when making lending decisions, but can provide a guide as to the estimated market value.