Real Estate Scams and Frauds

Considering buying property in India? Purchasing a property is a significant milestone and a major financial commitment for most of the individuals. Unfortunately, this makes the real estate sector an attractive target for scammers and fraudulent activities.

The process of buying a home can be filled with excitement and pressure, particularly in a competitive real estate market.

Real estate investing offers great potential for financial growth and securing your future. However, in the rush to buy properties, many individuals fall victim to scams and lose their hard-earned money.

In this article, we will delve into the inner workings of real estate scams, highlight the warning signs to be aware of, and be equipped with the information necessary to protect your hard-earned money.

What is a Real Estate Scam?

In India, the term “Real Estate” refers to the sector involved in purchase, sale, and development of properties, encompassing residential, commercial and industrial spaces. The market has witnessed significant growth and has become one of the major contributors to the country’s economy.

From the last fifteen years, the real estate market in India has grown a lot. But because there aren’t many strict rules in place, there has also been a rise in property fraud.

A Real Estate scam is when someone falsely pretends to own a property to deceive people and take their money. These scammers may even sell the same property to different individuals, causing confusion about who actually owns it.

If you are wondering how to know if you might be scammed in a real estate deal, the truth is that it’s not always easy to tell. However, there are warning signs and helpful tips you can use to shield yourself from fraudsters. 

Let’s be knowledgeable about the top real estate scams and prevent ourselves from them.

Top Real Estate Scams

List of numerous types of real estate scams you should know about.

1. Double Registrations

The most common real estate scam is double registration, where a property is registered or sold to multiple buyers without their knowledge. 

The scam begins when a fraudster forges or manipulates documents to create multiple sale deeds for a single property. Then proceeds to sell the property to multiple buyers. Each buyer believed they were the legitimate owner of the property. The fraudster takes advantage of poor coordination or loopholes in the registration process, allowing them to do scams.

Scenario: Scammer manipulates the layout, where property has two roads, one to south and the other to west with the survey number 105. Now they show a fake document which has only one road with survey number 105/1 and sell it to buyers. Since the original documents are altered with little modification, it becomes difficult to find the property documents online with the accurate details of purchased land. 

To overcome this scam, 

1. It is essential to physically visit the location and verify if the provided layout matches the current position. 
2. Local verification with individuals familiar with the land is also crucial.
3. Check the linking document to confirm if the land can be sold and ensure that all relevant parties have signed the sale document.
4. Conduct thorough research to verify its ownership history and title documents.
5. Consult legal experts and search at the appropriate government offices to ensure no other registrations exist.

In cases of double registered land, determining the rightful owner requires thorough verification of the person’s documents and linking information, as ownership lies with the legitimate owner, not necessarily the one who purchased the land.

2. Title Fraud

Title fraud occurs when a scammer fakes property ownership documents to pose as the rightful owner or power of attorney holder. They often target vacant properties or those owned by individuals residing elsewhere. Once the scammer forges the document, they sell the property to unsuspecting buyers. By the time the fraud is discovered, the scammer has disappeared.

Similarly, fake builders sell projects on land they don’t own, leaving investors in a predicament.

Preventive measures to protect yourself from this type of scam,

1. Periodically checking property records and title deeds to identify any unauthorized changes or transactions.
2. Safeguard personal information and property-related documents.
3. Be cautious when engaging in online property transactions, and only use reputed platforms.
4. Report suspicious activities early to the appropriate authorities, such as local law enforcement or the land registry office.

3. Rental scams

Rental Scams are tricks that dishonest people use to take advantage of those looking for a place to rent. They know that many people are searching for rentals, so they use different tricks and get their money or personal information. 

These scams can happen online, like on websites with rental listings, or even when you meet them face-to-face.

Scammers create fake rental listings for properties that either do not exist or are not available for rent. They even use attractive pictures and titles to grasp potential tenants. In some cases, they claim to be landlords or property owners who are located in different cities. 

Precautions to be taken:

1. Take time and visit the property and confirm its availability for rent.
2. Inspect the premises, meet the owner and ensure property matches the advertised information.
3. Cross- check the contact details of the owner through reliable sources.
4. Use trusted and reputable rental platforms when searching for rents online.
5. Use secure and traceable payment methods to avoid scams.

4. Mortgage Fraud

Mortgage Fraud happens when people lie or trick lenders to get a mortgage or gain some personal benefit from it. They do this by giving false information or by manipulating the mortgage process. This can happen when applying for a loan or during the final steps of closing the deal.

Types of Mortgage fraud

1. Manipulating the appraisal process to make the property seem more valuable than it actually is. This helps borrowers get larger amounts of loans.
2. People lie about their income or job details to get a bigger loan or better interest rate.
3. Fraudsters use others’ identity to apply for a loan on their behalf. They pretend to be that person to cheat the lender.
4. Borrowers secretly get a second mortgage without telling the lender.

To protect yourself from the fraud, verify information, research about the lender and consult professionals.

5. Delayed or Incomplete Projects

Delayed or incomplete project scams in real estate happen when developers don’t finish construction of projects on time or leave them unfinished, which leads to financial losses and inconvenience for buyers and investors.

These scams mainly target people who have bought properties that are still being built.

Developers make attractive promises about finishing the project and handing over the property on schedule to attract buyers and investors. Sometimes, they may get involved in legal disputes related to environmental issues or failures to meet regulatory requirements. They also fail to provide the infrastructure or amenities they agreed with, such as roads, water supply, electricity etc. 

To avoid scams, do prior research into the developer’s reputation, previous projects, financial stability and overall track record on completing the projects.

6. Land Encroachment

Land Encroachment in the real estate market occurs when people or organizations unlawfully occupy or use land that does not belong to them. They do this without the owner’s consent or legal rights, with the aim of benefiting themselves in some way.

Scammers intentionally extend their existing structures beyond their own land boundaries and encroach upon neighbors property. They also take over land that is privately owned or government land and build or utilize it for their own purpose. Also, with the support of influential people or groups, they forcefully occupy land that rightfully belongs to others.

Preventive measures

1. Conduct regular inspections of your land to identify any issues or boundary disputes.
2. Before engaging in transactions, verify the documentation of the property.
3. Verify the details mentioned to you in the registry office.

7. Online Listing scams

Online listing scams aim to target individuals who are looking for properties online. They take advantage of the convenience and popularity of online platforms to trick potential buyers or renters, with the goal of gaining their money. These scams involve creating fake property listings that appear attractive. Some use stolen pictures and unrealistically low prices.

Once the victim shows interest, scammers may request upfront payments or deposits, citing advance payment or administrative fees or the need to secure the property.

8. Disputed Property scams

Disputed property scams are deceptive schemes where fraudsters engage in illegal activities related to the buying, selling, or renting of properties that have ongoing disputes or legal problems.

These scams primarily target individuals who lack knowledge about the property’s current ownership or legal status, taking advantage of their unawareness.

Methods used by scammers include altering property records, forging documents or illegally occupying disputed or public lands. Some might steal other’s identity, pretending to be legitimate property   owners or real estate agents. They use fake documents to advertise and sell properties that they don’t actually own.

9. Illegal Conversion scams

Illegal conversion scams occur when people engage in fraudulent activities by converting properties in ways that violate zoning laws and regulations. These scams specifically target buyers who are unaware of unlawful conversion and it’s potential consequences.

Scammers make conversions by changing the purpose of a property without obtaining the required permit or approval from the authorities. For instance, they might have constructed a building which consists of 6 floors but the permit for that property is only for 4 floors. The remaining 2 floors constructed are illegal and they use them to generate money by selling those to  buyers.

Another one is overcrowding. They pack multiple people or families into spaces that are not designed to accommodate them. This will lead to hazardous living conditions, health risks and impact both the occupants and the community.

To protect ourselves from illegal conversion scams, it is essential to conduct research on property and compliance with zoning laws. Seek professional advice who has better knowledge of zoning.

Do you know we even have a guide which can give zoning information for the properties?

Check out the HMDA website and Master Plan.

10. Hurried Sale

A “Hurried Sale” or “Rushed Sale” scam happens when scammers use tactics to pressure people into making quick decisions about property transactions. They take advantage of the urgency and lack of investigation that often accompany rushed sales. 

Scammers make people feel rushed by saying the property is very popular or that the price will increase if they don’t act fast. They also give discounts or some special offers for a short time to make buyers feel like they have to decide quickly. They hide significant issues or defects in the property and highlight only the good parts of the project. They might also show forged documents or give inaccurate descriptions of the property’s features and amenities to tempt buyers into making rushed decisions.

It’s important to follow the below steps to shield from these types of scams.

1. Take a good amount of time as this will be a large investment.
2. Double check all the claims made by an agent or seller.
3. Don’t make decisions quickly with limited information.
4. Be aware of high -pressure tactics.

11. Deviations from Plans

Do you see deviations in the construction plan from the original? Then you are scammed by changing the agreed-upon property plans.

Usually, scammers show detailed designs with good amenities or potential profits to attract investors. Once the property deal starts, they secretly alter the plans without information. They make unauthorized modifications without getting the proper permits and licenses. These changes violate the building codes and create legal problems or safety risks.

These deviations can also lead to extra expenses for the buyers. Scammers demand more money or surprise fees to cover the changes they made. As a result, the property’s value may decrease, and investment returns may suffer.

 To protect from these, follow the below steps,

1. Keep records of all communications and transactions.
2. Clearly document all agreements and changes in writing.
3. Visit the property during construction and be involved in inspection
4. Carefully review the design document and seek advice if needed.