Property Loan Fraud by Builder: What Steps Can You Take?

Imagine this: You’re caught in a property loan fraud by a builder, lured by a dreamy offer— not one but two perfect homes that’s almost too good to be true. You’re lured by a dreamy offer—. A reputed builder convinces you to take a loan, with assurances that the EMIs will be paid by the builder until possession. Sounds perfect, right?

Fast forward a year, and the nightmare begins! The builder stops paying the EMIs. Suddenly, you’re loaded with a hefty loan of two apartments totaling over a crore, paying EMIs of nearly ₹1 lakh a month. Builder has disappeared, leaving projects unfinished. It felt you’re trapped in a financial mess —paying for homes you may never own, stuck in debt that could cost you more than ₹3 crore in the long run. The property loan fraud by the builder has left you in a nightmare you can’t wake up from. What’s worse? Scams like these are very common today. Aspiring home owners are being dupes with flashy offers and promises and left in such crisis. While this is a tough wake-up call to stay careful, what really matters is knowing the next steps if you ever find yourself in a situation like this

What to do if Property loan fraud by builder not paying EMI?

You can resort to the legal remedies under Indian civil and property law to come out of this. Below are some of the steps and solutions, discussed pointwise.

1. Contact Your Bank

• Check for a Loan Restructuring: Contact the grievance redressal team of the bank and request a restructuring of the home loan EMI, showing your inability to pay due to builder fraud on property. Banks sometimes consider restructuring to avoid turning the loan into an NPA (non-performing asset).
• File a Complaint: An official complaint to the bank about the builder loan fraud might help you request a temporary freeze or stay order on EMI payments while the matter is being investigated.
• Escalate to RBI Ombudsman: You can bring up this complaint to the RBI Banking Ombudsman, if bank fails to support

2. Legal Recourse Against Builders

• File an FIR: Lodge FIR against the builders for fraud, breach of trust, and misrepresentation under the Indian Penal Code (IPC). Include all supporting documents as evidence. Find out what are the relevant Indian civil laws and acts for builder home loan fraud.
• Civil Suit for Fraud: You can demand compensation for emotional damage and financial losses from the builder by filing a civil suit for fraud against the builder.

• 3. Stop EMI Payments (If needed be)

• However, if you stop your EMI payments, there might be consequences, such as a negative credit card score and the bank initiating recovery proceedings. But, sometimes, thought rarely, the bank might agree to negotiate.
• The bank may issue a SARFAESI notice under the SARFAESI Act, under which they have the authority to seize and auction the property to recover their dues. This is quite a lengthy process and you will be left with some time to explore other avenues.

5. Criminal charges and Risk of Prison

• Defaulting on EMIs is not a criminal offense by itself in India. However, a cheque-bounce due to insufficient funds or changing your signature purposely may draw charges under Section 138 of the Negotiable Instruments Act. This can can lead to:
  • Imprisonment for up to 2 years, or
  • Fines equal to twice the cheque amount.
• For such cases, court might take months or years to come to a verdict.

6. Raise a Complaint at RERA (Real Estate Regulatory Authority)

• For non-completion of properties, you can file a complaint with RERA. Home buyers can get resolution from RERA and the builder will be ordered to return your money or complete the project within a specified time. If you don’t know how to file a complaint at RERA, here’s a step-by-step guide to help.

7. Involve in Debt Resolution Through Insolvency

• If you can’t bear the home loan EMIs, consider filing for insolvency under the Insolvency and Bankruptcy Code (IBC) as an individual. So, you can restructure your debts legally.

8. Check the Government Schemes

• Some state and central governments bodies offer financial aid or legal assistance to victims of profile funding scam. Research if any such schemes apply to your situation. Find a complete guide to government schemes that might help for Property loan fraud by builder

9. Don’t involve in Self-Incriminating Actions

• Signature change or stop-payment issuance orders may generate suspicions of intent to default. Make sure to document any such steps as a part of your dispute with the bank to avoid criminal liability.

10. Practical Steps Without a Lawyer

• Visit Legal Aid Services: Free legal aid is available through District Legal Services Authority (DLSA) or state bar associations for those unable to afford a lawyer.
• Connect with NGOs that assist victims of property fraud by builder or financial damage.
• Make use of property loan fraud forums and groups for resolution or arbitration.

Worst-Case Scenario

• Financial Consequences: The properties may be seized and auctioned to recover dues. Now, you might ask can under constructed property be seized by the bank? Short answer is Yes, long answer – Bank might consider some other factors like market value of the unfinished property or unclear ownership.
• Legal Action by Bank: Civil suits or arbitration proceedings for loan default, but prison sentences are unlikely unless you are proven to be fraud.
• Credit Impact: Long-term damage to your credit score can be expected

Final Thoughts

You should have all documentation related to the properties, loan and builder correspondence. Move systematically and explore all the legal ways to resolve property loan fraud by builder.