LAHORE, Aug 31: Apprehending a mega scam in the booming real estate business, different government agencies have started cautioning people to buy plots only in duly-approved housing schemes.

"We do approve schemes after following a strict procedure. But since we have little means to stop on-ground irregularities also being committed by powerful institutions and people engaged in the real estate business, we have chosen to educate people on buying trouble-free plots.

We want them to refrain from investing money which they cannot recover in case of any fraud," an official of the Lahore Development Authority informed Dawn on Tuesday. He said many housing schemes mushroomed over the years were not following the rules and regulations and defrauding people.

And since the government did not want to become a part to any controversy, it was giving a warning to the people through newspapers. "The warning is late but still good. The government must protect the people who are blindly investing in real estate," he said.

Every builder or society is required to submit ownership documents of land where it intends to build the housing colony while seeking an NoC from the LDA which in turn invites objections from the people about the ownership of the claim.

Afterwards it approves the scheme plan submitted by the builder or the society and mortgages 20 per cent of their plots as guarantee for development. It also takes possession of the land shown to be used for basic development and public utility before according final approval to the scheme.

Beyond that, it has no system to check record of the allotment to people or to enforce its pre-conditions. It has also no mechanism to have the development speed expedited.

The housing sector saw a boom after manifold increase in remittances from expats following the 9/11. A majority of them invested in the real estate considering the bank rates meagre and the stock market risky. The Forex scam which swallowed billions of rupees of people and a slump in trade and industry were other major reasons (of investment in housing sector).

The situation attracted big investors and then institutions to start housing schemes. The mad race that followed increased the prices of land manifold, particularly in the suburbs of cities.

"The balloon of prices inflated as the big guns purchased chunks of land at low prices and sold them at exorbitant rates. The average price of a one-kanal plot in any society in Lahore ranges between Rs2.5 million to Rs10 million," sources said.

The housing schemes are approved by the LDA and the Cantonment Board. The LDA has a list of 200 approved schemes. But an estimated 200 to 300 unapproved societies too are operating without any let or hindrance.

According to some LDA officials, even the registered societies are violating the pre-conditions but it can only issue them notices or challan the defaulters. "It had no will, mechanism and manpower to stop the violators who were many," they said.

The residential colonies launched without any approval were simply slums as they could not acquire basic amenities from the government agencies. The societies were ill-planned where people had to arrange for everything but the LDA could not demolish them because of the legal, social and moral constraints, they said.

According to some builders, government officials and investors, unscrupulous among the societies and builders are defrauding people through different means, all promising to help them build ideal houses in "heaven" which is turning out to be hell for the unwary customers.

The noticed irregularities include launching a housing scheme without land or selling plots on papers more than in possession. Those who launch a scheme without land escape after receiving advance booking or registration amount. And those who sell more plots than in possession make a number of buyers wait for their turn which rarely comes.

Those having "some element of responsibility" among the second category of people sell phony plots in anticipation of buying them with the money to be received from the customers. But normally they cannot do this because they cause an increase in the value and price of the adjacent land by their pre-announced intentions of buying it.

They neither buy land at prices higher than they had promised to their customers nor do they return their money. And those who intend to return the advance money are pestered by angry customers.

Many societies themselves occupy attractive plots giving only those with less value to their customers. Similarly, many societies and developers start schemes without having them duly approved from the government agencies, pretending they can themselves approve the building plans of the houses.

But, when the plots are sold the people come to know that they cannot build the houses because of lack of permission by the government agencies, taking them to a point of no return.

Another kind of societies and developers who launch schemes but do not finish the development work there, sending people from pillar to the post for the basic amenities which no government agency provides in private colonies as a rule.

Selling of plots to more than one customers is yet another major problem as there is no organized system to check the ownership record with any government agency. Shrewd buyers sensing no or little profit of their investment too sell files of their plots to unwary people at costs higher than the actual value.

The people trapped into this kind of fraud are simply deprived of their money and those who try to retrieve it are met with roughnecks directly dealing with the fraud or hired by the developers to shoo away people.

Every builder and society is required to pledge 20 per cent of its plots with the LDA as a guarantee to develop the scheme. But in many cases these plots too are sold to the unwary people who are trapped into the shady deal with a much lower price of the lot. Such plots are ultimately retrieved by the agency which under the rules is bound to complete the incomplete development work by selling them.

LSE chief for level playing-field