Property buyers must be wary of Ponzi schemes
Before investing your life savings in a property, understand how not to get lured by attractive offers
Hyderabad: Investing in a property is a once-in-a-lifetime decision for the majority of us. Many of us end up using up our whole life savings to invest in the property of our dreams. Whether it is an apartment or a big villa, property buyers always look at this investment as something that will provide them with good returns in the future.
And using this sentiment against property buyers, there have been instances of developers luring people with low price schemes, undivided share (UDS) schemes, or pre-launch sales schemes. In all these schemes, buyers are coaxed into buying property at a discounted cost with the promise of future growth prospects.
“These schemes are like a virus for the real estate sector. Buyers are getting attracted as they see low prices and invest their hard-earned money into a venture – which hasn’t even started and/or does not have any government approval. We suggest consumers to not get lured by such Ponzi schemes,” says G Ram Reddy, National V-P, Credai.
According to experts, these kinds of schemes may attract buyers but will harm the industry in case the project fails.
“Whether it is pre-sale or UDS scheme, all are illegal in nature and these developers are not following any rules relating to layouts and many run away when the time comes to hand over the property. The State should set up an information and guidance cell for new buyers,” says GV Rao, president, Telangana Developers Association.
“Before getting a RERA number, a developer can offer a property for a low price, and post getting the number they may increase the price which will put an additional burden on the buyer,” says Kalisetti Naidu, real estate space analyst, Yards and Feet Property Consultants.
So, in such circumstances what should a prospective buyer do before investing in a property? The unanimous answer to this is the Real Estate (Regulation and Development) Act, 2016, which seeks to protect home-buyers as well as help boost investment in the industry.
“RERA has regulated all the legalities surrounding the security to investors. Starting from the kind of property that needs to come up in a particular land to permissions to layout and planning to water harvesting, everything is mentioned in RERA. Buyers must check for RERA numbers on the website and they will be able to get all the information needed,” says Naidu.
Checklist for buyers
· Before investing in a property, ask for RERA number from the developer
· Double-check the number on the RERA website to get details about the property
· Get as much information as possible on builders’ profiles, especially on their previous projects, etc
· Don’t get lured by low-price properties or futuristic properties
· Be aware of discounted apartments being offered by developers even before they are constructed
What you need to know
Undivided shares (UDS) scheme
Under the UDS scheme, buyers are shown as joint landowners and they are told to pay an upfront amount to the builders at the time of buying the land. The builders, in return, promise to give an apartment once the project gets completed. While this might look like a lucrative investment option, the fine print is much different wherein if the project gets delayed, then the buyer cannot take legal recourse as the developer does not have RERA approval. Also, there have been cases wherein developers have taken the upfront amount and vanished in thin air.
Pre-launch offers
In another such scheme – the pre-launch sales – buyers are told to pay a discounted amount for an apartment which is still under construction and are promised the apartment maybe three or four years later. Mostly, these properties do not have RERA approval and that is why, they can sell them for a low price.
What is RERA?
RERA was established to enhance accountability and transparency concerning housing transactions and real estate. The Act has established a fast-track mechanism for the settlement of disputes. Under the Act, every developer is provided with a RERA number and if the property is approved by RERA, then, it automatically gets approved by HMDA and GHMC in Telangana.
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