Checklist of Documents to Prevent Property Fraud in India

Avoid Property Fraud

Purchasing property is one of the most significant investments you will make in your lifetime, and ensuring its legitimacy is crucial to safeguarding your financial future. In India, property fraud is a common concern, making it essential for buyers to exercise due diligence before finalizing any real estate transaction. By thoroughly verifying key documents, you can protect yourself from potential scams and legal issues. This guide provides a comprehensive checklist of essential documents to check, helping you navigate the property purchase process with confidence and peace of mind. 

Table of Contents

Types of Property Frauds in India

  1. Title Fraud: Fraudsters create fake title documents to falsely claim ownership of a property. This can lead to legal disputes and financial loss for the genuine owner or potential buyers.
  2. Forgery: Property documents, such as sale deeds, are forged to illegally transfer ownership. This type of fraud often involves the alteration of original documents or the creation of entirely fake ones.
  3. Impersonation: Fraudsters impersonate the legitimate property owner to sell or mortgage the property without the owner's knowledge. This can result in the property being sold or mortgaged to unsuspecting buyers or lenders.
  4. False Promises: Developers or real estate agents make false promises about amenities, infrastructure, or government approvals that do not exist. This misleads buyers into purchasing properties under false pretenses.
  5. Benami Transactions: Properties are purchased in the names of fictitious persons, non-existent entities, or people who do not actually own the property. This is done to hide the true ownership and can be used for money laundering or tax evasion.
  6. Misrepresentation: Providing false information about a property's location, size, or legal status to mislead buyers. This can lead to buyers purchasing properties that do not meet their expectations or have legal issues.
  7. Multiple Sales: The same property is sold to multiple buyers at the same time. This results in legal battles among the buyers, as only one of them can legally own the property.
  8. Non-Delivery of Possession: Developers receive payment from buyers but fail to deliver possession of the property as agreed. This can cause significant financial and emotional distress to buyers who may have invested their life savings.
  9. Encroachment: Fraudsters illegally occupy a property by altering its boundaries or using fraudulent documents to claim ownership. This can result in lengthy legal battles and loss of property rights for the genuine owner.
  10. Loan Fraud: Acquiring loans by using fake property documents as collateral. When the borrower defaults, the lender is left with worthless collateral, leading to financial losses.

Suggested read: Fake vs Genuine Home Loan

List of Essential Documents To Avoid Property Fraud

1. Title Deed

  • What to Check: Verify the title deed to ensure the seller has clear ownership of the property. The deed should be in the seller’s name, and there should be no legal disputes or encumbrances.
  • Why It’s Important: Ensures that the seller has the right to sell the property.

2. Sale Agreement

  • What to Check: The sale agreement should clearly outline the terms and conditions of the sale, including the price, payment schedule, and delivery date.
  • Why It’s Important: Legally binds the buyer and seller to the agreed terms.

3. Encumbrance Certificate

  • What to Check: This certificate shows any liabilities or legal dues on the property. Ensure there are no outstanding mortgages, loans, or legal disputes.
  • Why It’s Important: Confirms that the property is free from financial and legal encumbrances.

4. Occupancy Certificate (OC)

  • What to Check: Issued by the local municipal authority, this certificate confirms that the construction has been completed according to approved plans and is fit for occupancy.
  • Why It’s Important: Ensures the building complies with local laws and is safe for occupancy.

5. Completion Certificate

  • What to Check: This certificate is also issued by the municipal authorities and indicates that the building is complete and complies with the approved plan and building standards.
  • Why It’s Important: Verifies that the construction is legally completed.

6. Approved Building Plan

  • What to Check: Ensure the building plan is approved by the local municipal authority. Check for any deviations from the approved plan.
  • Why It’s Important: Confirms the legality of the construction.

7. Land Use Certificate

  • What to Check: Issued by the local development authority, this certificate confirms that the land is used for the intended purpose (residential, commercial, agricultural, etc.).
  • Why It’s Important: Ensures the property use is legal.

8. No Objection Certificates (NOCs)

  • What to Check: Ensure that the builder or seller has obtained all necessary NOCs from various departments like water, electricity, pollution control, and fire safety.
  • Why It’s Important: Confirms compliance with regulatory requirements.

9. Tax Receipts

  • What to Check: Verify the latest property tax receipts to ensure that the previous owner has paid all dues.
  • Why It’s Important: Ensures there are no outstanding tax liabilities.

10. Power of Attorney (if applicable)

  • What to Check: If the property is being sold by someone on behalf of the owner, check the power of attorney document.
  • Why It’s Important: Validates the legal authority of the person acting on behalf of the owner.

11. Society Documents (for apartments)

  • What to Check: Check the society’s registration certificate, share certificate, and NOC from the society for the sale.
  • Why It’s Important: Ensures the seller has the right to transfer ownership in a society-governed apartment complex.

12. Loan Clearance Certificate

  • What to Check: If the property is under a mortgage, ensure that the seller provides a loan clearance certificate from the bank.
  • Why It’s Important: Confirms that the property is free from any loan obligations.

Suggested read: Real Estate Scam

Verifying these documents thoroughly can help you avoid property fraud and ensure a smooth and secure property transaction. It is also advisable to engage a competent legal professional to assist in verifying these documents and ensuring all legal aspects are covered. This due diligence will help safeguard your investment and give you peace of mind.

FAQs about Documents to Prevent Property Fraud in India

Verify the document's authenticity with the local sub-registrar's office, check for proper stamps and signatures, compare with original records, and consult a legal expert to scrutinize the details.

Look for discrepancies in ownership documents, verify the seller's credentials, cross-check property records with municipal authorities, and be wary of unusually low prices or pressured sales.

Verify the title deed, check the encumbrance certificate, confirm the layout approval, obtain a no-objection certificate (NOC) from relevant authorities, and ensure the land use is legal by reviewing the land use certificate.

Conduct thorough due diligence, engage a legal professional for verification, use escrow accounts for transactions, register the property promptly, and maintain all records and communication in writing.

A khata certificate is an official document issued by the municipal corporation that confirms that a particular property is registered in the owner's name. It is essential for property tax assessments and legal transactions.

Published on 10th June 2024