The individual buyers of real estate properties can be the victims of construction industry fraud if their properties are not completed on time and additional payments are requested to complete the job. There have been cases where builders have launched projects, collected deposits and then disappeared. There have also been instances of the same plot of land being sold to multiple buyers.

It is common practice amongst developers to use the funds of one project to launch the next project rather than complete the first one. Builders have also sold units on land they do not own or where they do not have the appropriate official clearances. Disputes between consumers and builders go to court for settlement but this can take a very long time to conclude.

Consumers are at significant risk of fraud from builders and action needs to be taken to mitigate this.”

Corruption has several forms. One form is the corrupt acquisition of land and conversion of its use. This is where developers acquire land on which usage is restricted and manage to clear it for conversion to residential or commercial use ready for construction. A second form of corruption is the need to obtain multiple official clearances to allow building to commence. There can be as many as 10 to 12 official agencies from which permission is needed to build. To expedite the process, a ‘facilitation fee’ will need to be paid at each level.

In addition to bribery, there is also a problem with fraud on government contracts where the agreed fixed rates are inflated and the completion schedule is manipulated to obtain early payment. “There is still a problem with change of scope of orders, although less than it used to be. There is now more of a focus on variations in scope, which are no longer accepted unchallenged.”

“The major type of fraud is bribery, driven by the need to obtain multiple official clearances. This should not be accepted as the cost of doing business.”

Courtesy: Grant Thornton

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