The rapid real estate development in the country has been rather fascinating and has enticed many to participate in the exuberance, where we have witnessed skyline of cities changing. The growing appetite for risk supported by rise in income levels has also encouraged many to gain from this, as many do indulge in collective investment schemes of real estate companies to share the benefits on a pro-rata basis. But you got to be careful, with whom you are dealing and not get lured by tall claims and fancy propositions.

Recently suspecting frauds in projects being launched by numerous real estate developers, capital markets regulator - Securities and Exchange Board of India (SEBI) has initiated a probe for possible violations of Collective Investment Scheme (CIS) regulations. The capital market regulator has been flooded with complaints of investors being duped by real estate companies promising huge returns in projects proposed to be developed from scratch through public money, thereby prompting it to launch probe against 50-60 such developers. The regulator is also investigating, prima facie whether these real estate companies are registered as CIS with them.
 

It is noteworthy that, in such a scheme the fraud is engineered in such a way that companies lure investors into putting in their money for purchase of land and thereafter for development of projects and promise them huge returns at a later stage. The companies’ even offer to buy back the properties with considerable appreciation to the original investment; but the investors often find being betrayed after having put in some money and small initial returns received, in certain cases.

We are of the view that, one needs to be wary while indulging in CIS of real estate companies and not merely get carried away by tall claims, fancy proposition and exuberance in the real estate market. Please note a number of fraudulent CIS entities are found operating in the country over past quite a number of years, which have come under the radar of duping investors of their hard earned money. We think that in order to infuse transparency in the real estate industry, the passage of Real Estate (Regulation and Development) Bill, in the budget session of the parliament is imperative to protect the interest of property buyers. A strong legislation would put a restrain on unethical and unscrupulous practices in the real estate industry, which from the outside looks very fascinating when the skyline of several Indian cities is changing.

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