Mar 2018
21

7 Key Parameters to Judge the Authenticity of a Real Estate Developer

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7 Key Parameters to Judge the Authenticity of a Real Estate Developer Update

Purchasing a home is every individual’s dream, and people often go an extra mile to convert that dream into reality. Sometimes they head to the wrong road and get lost. I have often seen people getting into unnecessary complications due to wrong selection of real estate developer and regretting it later. A person may not be able to get the possession of his property long after the deadline is crossed, or perhaps the land is used illegally for construction purpose. These are some of the problems faced by a common buyer who works tirelessly to buy a home of his own. 

I know the value of your hard earned money and thus it is important to make a wise decision while selecting a real estate developer. The fierce competition in real estate business has led to scams all across India. Ironically, people are still falling prey to these scams despite being informed.

A Gurugram-based real estate developer was accused by 700 investors for luring them into making an investment over 1000 crore in a real estate project with a false promise of delivering 12% returns after possession. The developer eventually vanished with the funds collected from investors. 

In another incidence, buyers were lured into investing in a project with the assurance of fixed rentals from the property, which never happened.

Here, I have compiled a list of parameters which you should consider to determine the authenticity of a real estate developer to save yourself from needless impediments aftermath.

Thorough Background Check

Before embarking on the next step, it is essential to carry out a thorough background check of a prospective real estate developer in order to verify their credentials. Market presence, stability, relationship with the clientele are some of the factors to consider while evaluating the credibility of a real estate developer.

Past Projects

Delayed and incomplete projects resulting in the delay in the possession of the property and eventually losing customers’ trust has led to the turbulence in the real estate business.

How well has the developer handled the past projects? Was the project completed by the given deadline? Has the developer compromised on the quality of work to meet the deadline? Consider asking the above-mentioned questions to yourself and then seeking answers through proper research.

It is often found that buyers have to compromise on the core amenities such as electricity, water supply, provision of ample parking space and other luxuries despite having made the payment for the same.

Also, delaying the projects purposely to gather sufficient funds from the buyers is another unscrupulous strategy resorted by real estate developers to deceit the gullible buyers.

Due to these aforementioned reasons, a stringent quality check has to be done to verify the authenticity of a real estate developer.

Legal Advice

A legal consultant is a right person to help you make an informed decision about the developer after checking their credentials. Ask the concerned authorities to submit a set of government approval documents before signing the contract. If they refuse to do so, think twice before you invest in the project.

In the process of illegally occupying the land, the developer has overlooked future consequences which have to be borne by the buyers eventually. Be smart enough buyer to avoid facing all these consequences.

Financial Position

It is necessary to gauge the financial position of a real estate developer to determine if they are good enough to deliver quality projects on time. What are the sources of funds? How well do they manage funds during market fluctuations?

The reputation of the developer is at stake if they don’t complete and deliver the projects on time. It may happen that they lack sufficient funds to ensure timely completion and delivery of projects.

It has been found that the money obtained from a particular project was pooled into another project, thus delaying both the projects simultaneously by the developer. So gauging the financial sources and financial management strategies of an organization before making an investment in its project can go a long way to prevent yourself from repenting it later.

Reviews from Previous Customers

Obtaining reviews from the previous customer can influence your decision about the real estate developer to a great extent. I recommend you to harness the power of the internet and social media to do a research about the organization. Check the list of completed projects, track records and customer feedback about the previous work done. Last but not the least, make sure the real estate developer is a member of real estate bodies like CREDAI. This will ensure that it is a genuine organization.

Title frauds had been done by the developers in order to make money from the innocent buyers. The developers obtain the fake title deeds for a disputed land and sell them to the buyers and vanish from the scene.

Bank Loans

A most important step in judging the credibility of a real estate developer is to check the bank records. Does the bank approve loans for the developer? Banks check their credit profile before approving loans. So, it is wise to check the records for making a right decision.

If a reputed bank has come up with home loans financing partner for a particular project, the chances of frauds or scams are relatively low as the banks perform a thorough background check before financing the project.

Contract Terms and Conditions

Read the contract thoroughly for the payment terms, date of possession, the penalty in case of delayed possession. Ask the developer to give all the claims it makes, in writing.

Check if there are any delay clauses in the agreement and the construction stages with timeframes are clearly mentioned along with a copy of the approved plan. Keep a close watch on the progress of the work until possession.

In order to protect yourself from the scams and frauds which proliferate across the real estate industry, a thorough research, caution, and intuition on your part is essential. It can help protect your hard earned money from going into the wrong hands of these unscrupulous real estate developer.

The Bottom Line

So, make sure you follow the given steps in order to determine the authenticity of a real estate developer:-

- Do the background check of the prospective real estate developer thoroughly by browsing through the real estate websites and checking the track record as well as the customer reviews.

- Hire a legal consultant to verify the genuineness of the developer. If it has all the documents concerning government approval, the chances of it being a fraud are less.

- Determine their financial position by figuring out the sources of income and how good it is in managing funds during the crisis.

- Check out if the bank sanctions loans for the developer. It means the developer can be trusted because the bank approves a loan of only those organization which are credible enough to pay back.

- Check the history of the projects. It may happen that fistful of projects are completed by the developer within the given time limit whereas others are delayed. Find out the reasons for the delay. 

Lastly, read and discuss the terms and conditions of the contract with the developer before signing it. Be smart and aware, and don't let any fake real estate developer con you.

Updated: 3/21/2018 1:37:54 PM
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