Real Estate Frauds in India: How to Recognize Them and Protect Your Rights

The real estate sector in India has been growing rapidly during the past few years, and this boom in real estate has attracted homebuyers, investors, and developers. Unfortunately, many common individuals, mainly first-time home buyers, turn out to get victimized by property fraud due to their ignorance of the law and misplaced faith in builders or agents. Therefore, it is necessary to have full knowledge of the most common property frauds and the protection given to buyers under the law in India.

This article intends to describe what property frauds and describe the appropriate remedies for homebuyers who have suffered. Whether you are buying your first home or an investment property, being aware of your rights and knowing what will save you a lot of time and money.

Common Types of Real Estate Frauds in India

The real estate market in India can be quite intimidating, and for those who are not accustomed to property laws, it can be even more perplexing. Here are some of the most common types of real estate frauds that hinder homebuyers and investors:

Selling Same Property to Multiple Buyers

This is a popular scam in which a seller fraudulently sells the same property to more than one buyer. This can take form of a fake sale agreement or just delaying the registration process, so when the real buyer tries to register it they find out someone else has claimed it.

Legal Tip: Make sure after you pay for the property, it is registered in your name.

Fake or forged Land Documents

Scammers will often use fake title deeds, property tax receipts or encumbrance certificates in order to say that the property is clear and belong to him/her. The documents are likely counterfeit but the property could also be in litigation or subject to debt.

Legal Tip: Hire a property lawyer to check the documents with the sub-registration office.

Misrepresentation of Ownership

Some sellers or builders are selling a property that they do not legally own. They may claim ownership on behalf of someone else, and will show you an expired or false power of attorney. The buyers usually realize the fraud when later the real owner objects to the sale.

Legal Tip: Always check the original ownership documents as well as any power of attorney’s validity.

Pre-launch or Under-construction Project Fraud

It is common for builders to sell homes while they are in the “pre-launch” stage, sometimes even before they have received approvals from the government. They will offer the properties to buyers at a lower price than market value to get buyers to come in and buy before the prices stabilize; however, the regulations come in later and delay the project for years, or worse, the project is never completed at all. Some builders simply disappear after they collect money from the buyers.

Legal Tip: Avoid investing in pre-launch properties if there are no government approvals and the project is NOT RERA-registered.

Selling encroached or government land

Sometimes fraudsters actually try to sell land that legally belongs to the government for example, temple trust or may be part of a reserved area such as forest or railway land. Buyers typically will only realize this was fraud after the actual owners like the government reclaim the land or demolish the building.

Legal Tip: Always check land records with the local municipal office or land revenue office.

 Unapproved/ Illegal Construction

Builders can, quite legally, add surplus floors, rooms and amenities at times, without any authorisation from the city planning office. The property may look attractive to you, but the illegal structures can be demolished at a later stage, and you will have no recourse.

Legal Tip: Always ask for the building approval plans and occupancy/completion certificates.

Fake promises in advertisements

Most builders provide brochures of fantastic luxury amenities like swimming pools, gyms, and gardens, which are never built. Buyers look at the fancy brochures and websites, but once they obtain the finished property they discover a different final product.

Legal Tip: You will be able to recover compensation for misleading advertising under RERA Section 12; if you can demonstrate you relied on the advertisement key aspects of the property.

Key Laws Protecting Homebuyers and Landowners in India

India has several laws to help protect property buyers and landowners against fraud. They allow a buyer to take legal action and seek damages if he is defrauded. Below is a brief explanation of the most important ones:

1. The Real Estate (Regulation and Development) Act, 2016 (RERA)

RERA is an act made specially to protect homebuyers and hold builders accountable.

• Section 3 & 4: Builders must register their project and provide truthful information about the project.
• Section 12: If a builder provides false information in advertisements or brochures, buyers may claim refund or compensation.
• Section 18: If the builder defaults on possession or doesn’t deliver, buyers will be entitled to compensation or interest

You can file a complaint on your State’s RERA website online.

2. Bharatiya Nyaya Sanhita, 2023 (BNS)

This new law replaces the old Indian Penal Code and updates the sections on crimes such as cheating and forgery in real estate fraud:

• Section 316: Cheating- Punishment: Imprisonment of a term up to 7 and fine.
• Section 324: Criminal Breach of Trust: when a person is entrusted with a property or money and uses it contrary to that trust.
• Section 334 & 335: Forgery: Making, or using forged documents such as title deeds, agreements and so on.

You can report the above types of crimes through an FIR (first information report) to the police.

3. Transfer of Property Act, 1882

This Act describes the steps needed to transfer land or a house legally. If the proper steps are not followed, the buyer may be unable to exercise their rights.

Use a registered sale deed and one that is signed by both parties.

4. Registration Act, 1908

Section 17: It states that property documents must be registered with the local sub-registrar to gain legal validity in court.

Don’t rely on notarized paper-use a registered document.

5. Consumer Protection Act, 2019

A buyer is a consumer. If a builder makes false representations, or does not transfer possession in time, the buyer can lodge a case in the Consumer Forum.

Cases in consumer courts are resolved quicker than in civil courts.

Legal Remedies Available to Victims of Real Estate Fraud

If you find yourself cheated in a property transaction, don’t lose hope. The laws in India provide various legal solutions depending on the type of fraud involved. Here is what you can do:

Lodge a Complaint with RERA

If the fraud involved a registered builder, late possession, or advertisements that are not what they promised, you can lodge a complaint against the builder under the Real Estate (Regulation and Development) Act, 2016.

• You can file an online complaint through your state’s RERA portal.
• RERA can compel the builder to refund your money, compensate you, and sometimes even interest for the delay.
• Under Section 18 of the RERA, you are eligible to get a refund if the builder cannot deliver.

RERA is much quicker and efficient than regular courts when it comes to resolving issues of housing projects.

Approach the Consumer Court

If you are a homebuyer who feels cheated due to poor construction, delays, false hopes, you can file a case against the builder under the Consumer Protection Act, 2019.

• Make sure to file your complaint at the District Consumer Dispute Redressal Commission if your claim amount is less than ₹50 lakh.
• If your claim amount is over ₹50 lakh then file your complaint at the State or National Commission.
• You will be seeking a refund, monetary compensation for mental agony, legal fees, and possession if appropriate.

You do not need a lawyer; any lay person can file a complaint.

Register a FIR for Criminal Fraud (BNS 2023)

If fraud involves fake documents, impersonation, or cheating, register a FIR at the nearest police station under Bharatiya Nyaya Sanhita (BNS), 2023:

Register a FIR under BNS, 2023 at the nearest police station, if the fraud involves impersonation, cheating or fake documents:

Section 316: Cheating

Section 324: Criminal Breach of Trust

Section 334 & 335: Forgery of documents

Civil Suit in a Court

If claim is regarding ownership of property or you want to stop someone from selling or occupying your property then you can:

• Initiate a civil suit in civil court for declaration, injunction, or specific performance.
• Useful in the cases when your property involves fraud, illegal possession, or double sale.

Access Free Legal Aid or Lok Adalat

If no lawyer can be found because you cannot afford one you can still: 

• Contact the Legal Services Authority (LSA) in your district for access to free legal aid.
• Commence your case through a Lok Adalat for fast, out of court settlements.

How to Avoid Real Estate Fraud: Practical Tips for Buyers

As the saying goes, prevention is better than cure and in property matters prevention helps you steer clear of blatant frauds and scams. Here are a few straightforward tips that will help you avoid falling for property scams:

Cross Verify Title Deeds

Request the original sale deed, the previous chain of ownership, and the Encumbrance Certificate (EC). This will confirm that the seller actually owns the property and can confirm there are no pending legal disputes and loans.

Check RERA Registration

You should check the project and builder on your State’s RERA website before purchasing any flat or under construction property. Each state RERA has the project and if they are registered, it is legally binding on the builder to meet the project deadlines, promises and liability.

• Visit the state RERA website.
• Search the project by the builder name or RERA number.

Avoid Pre-Launch Offers

Do not accept discounts for “pre-launch offers”, before the discount check if the builder has all the government requirements approvals in regards to clearance for land, clearance of environment, etc., including building plans.

Always get the Agreement Registered

Always get the sale agreement registered at the sub-registrar’s office. You should not just get a notarized agreement. A registered document is given more legal value than one which is not under the Registration Act when you receive court process.

Avoid Paying Cash

Always make payments by bank transfer or cheque. This creates a legal trail of evidence and also avoids the trouble of paying in cash, which usually involves illegal black money transactions.

Conduct Legal Due Diligence

Hire a property lawyer to:

• Check the documents
• Verify the municipal records
• Check for hidden liabilities

It may cost a little more up front; however, you can save in the lakhs.

Go to the Property 

Go to the involved site. Check for the encroachment, boundaries that may in dispute, is it in a red zone (government, forested, reserved land etc.).

FAQs on Real Estate Frauds in India