There has been an increase in real estate companies in Hyderabad offering discounted plots at tempting rates with a host of additional features; these plots are usually undivided plots at projects under development. Such real schemes are pushed heavily by developers/builders and promoters with a big advertising/marketing budget to sell divided units in undivided lands. It has come to light that these kinds of schemes are usually bogus schemes where the profits from the project are shared with early investors are actually investments from the most recent investors. These schemes are similar to Ponzi schemes in which high above average returns are promised in return for initial investment.
These schemes are only possible when the developers sell Undivided Shares of land (UDS) in realty projects under development illegally. The Telangana State Real Estate Regulatory Authority (TS-RERA) has announced in the beginning of April that it has identified a lot of such illegal schemes being advertised mainly in and around the city of Hyderabad; TS-RERA has declared it will put an end to such illegal activities by imposing fines and legal notices.
TS-RERA conducted a meeting earlier this year with senior officials and industry representatives to make the decision on such UDS land schemes. The land regulatory body also announced that offenders of this rule would face a severe penalty which would mean the developers might have to pay a punishment fees that could amount up to 10% of the total project cost.
The chairman of TS-RERA, Mr. Somesh Kumar issued a circular stating the same. The highlight of the circular being – “It has come to the notice that certain promoters/builders/developers are advertising/marketing/selling units in un-divided share of lands in projects to be launched/being constructed at nominal/discounted prices. This is not consonance with Section 3 (1) & 4 (1) of the Real Estate (Regulation and Development) Act, 2016 and Rule 1 (2) of the Telangana State Real Estate (Regulation & Development) Rules, 2017,” and it continued to say “…sale of UDS lands without prior registration of the project with TS-RERA, shall attract penalty up to 10% of the total project cost under Section 59 of the RERA Act, 2016.”
Information about such schemes that surfaced recently shows that developers, contractors and builders buy larger areas of land between 10 to 15 acres in size and then split them up into smaller 100 to 150 plots and sell it for immediate payment. Each of these individual plots could be sold for as low as 25 lakhs or as high as 50 lakhs with the buyer sold by promises like free maintenance and house construction etc. which remain unfulfilled in the future.
According to the RERA Act and regulations, these kinds of UDS projects require clearance from authorized organizations/authorities whereas market experts claim such projects often lack the necessary permissions and legal documents. The TS-RERA has issued the circular not just to warn the developers who are resorting to such illegal techniques to generate quick returns but also to the regular citizens, investors and buyers to spread awareness about the traps of such illicit schemes, the TS-RERA has cautioned the public to stay away from such schemes and invest in regulated projects instead.