The considered law to clamp down on Ponzi schemes will disallow realty developers who offer fixed returns till delivery of flats, in addition to schemes from jewelers as the government deems them to be “unregulated deposits”.
The crackdown on real estate firms, jewelers and other units that solicit deposits is part of the Banning of Unregulated Deposit Schemes Bill that was passed by the Cabinet on February 21 and is anticipated to be launched in Parliament soon.
The bill provides for every deposit-seeker, inclusive of entities that are already controlled, to register with the deputized command provided within the domain of the proposed law.
Quite a few unfamed realty developers, deprived off finance from lenders, offer “assured returns” of 12-14% till delivery of flats or even seek investments with the commitment of alluring returns.
In the same way, a number of jewelers, inclusive of a few eminent brands in the industry, have schemes that facilitate customers to pay 11 instalments with the 12th sourced from the firm. The funds can then be used to purchase jewelry within a fixed time period.
There are others that call for consumers to fulfil their instalments for a minimum of 10 months and on the basis of the period of the deposits, have in their offering discounts of 50-60% of the monthly endowment.
High-level government executives confirm that these schemes are nothing apart from deposits and have to be brought under the scanner.
On the other hand, there have been efforts in the past to restrict these types of offers, they have not just persisted but even thrived lucratively in the realty industry.
In a large number of circumstances, the investors have protested that builders have paid the instalment in the beginning few months following which the payment has ceased.
“Many investors, especially in Bengal, Odisha and Jharkhand, have burned their fingers and they are poor people. We have received several complaints from Noida and nearby towns too about real estate sector. It is important to regulate them,” expounded an official. Quite a few investors have been deceived by Ponzi schemes like; Saradha and Rose Valley that were unimpeded and pledged fruitful returns.
The bill is suggestive of stringent provisions or penalization, along with up-to-a-seven-year imprisonment, for advertising schemes that have not been registered. The schemes being offered by the builders attempt to satisfy compromise with the directive remaining vague. With the advent of the new law, the government is trying to tighten the screws and safeguard the interests of investors.