The purpose behind in creating ghost buyers
Real estate is one of the busiest and one of the trickiest investments in today’s time. Since the inception of the realty industry, fraud has been a huge part of this sector. No matter if the industry is doing extremely well or is looking as bleak as ever, there has always been some kind of fraud that has been part of the industry. Recently, there has been news about ‘ghost buyers’ or ‘dummy buyers’, which is catching fire.
Recently, the RBI aka Reserve Bank of India has stated, that they have been receiving complaints regarding the banks giving home loans to dummy buyers, who are known as ghost buyers. The RBI has undertaken an investigation to find out the cause and effect of the issue. The situation has given rise to a serious problem in regards to accumulating non-performing assets (NPAs).
An NPA is a credit facility through which the interest/instalment of a principal amount has remained the category of ‘past due’ for a particular period of time. Simply put, the asset will be tagged as \'non-performing\' as soon as it ceases to produce income for the bank or the lender. The bad loans will result in redirecting the funds from potentially good projects to the bad ones. It is the overall economy that suffers because of this loss. The RBI intends to keep a close eye on this issue and is keen on investigating the matter.
In this case, the builders find potential dummies who apply for a loan and once the loan is sanctioned the money is handed over to the builders. For their trouble, the ghost buyers obtain at least 4-7% over the rate of the home loan as commission. The brokers provide what is called a ‘batch of buyers’ to the developers and builders who are looking for a large amount of payment of around Rs. 25-100 crores. Experts from the industry believe that this scheme is helping the builder to remain afloat in the real estate industry.
The current situation of the real estate market is not ideal and therefore, the builders are getting anxious for capital. They need the cash flow for the business to survive. This anxiety has provoked the builders to create ways that will ensure that there is cash flow.
Experts have found that the builders are indeed facing fund crunch and they are not able to acquire cheaper loans from the bank or even the private lenders. The cost of bank’s finance is around 14-18% and the private equity funding is around 18-22%. As far as the grey market is concerned, the cost is ranging from 30-60%; the cost varies according to the builder’s collateral. This percentage is too high. But unfortunately, builders are finding difficulty in acquiring loan from the banks and are therefore, adopting unfair means.
In such a case, it becomes extremely important for the real estate industry to create a scenario that helps the buyers, builders, and the economy to coexist and flourish successfully....