CREDIT NOTE what are they
and THE SCAM attached @atulaynehra writes
We got to go some 6-7 years back to understand the story behind the credit and debit note concept. The interesting fact behind the "NOTES CONCEPT" is that it's a virus that has spread in Just the Delhi NCR area and not any other parts of the country.
The Background
The developers especially the B, C , D category and the new entrants, to sell there over priced products offer some mouth watering "Commissions" "Fees" to the brokers / consultants / agents/ channel partners and that's where the game of "NOTES CONCEPT" start.
As we all understand that the real estate industry in India is the most UNORGANISED sector and provides ample opportunities to uneducated to professionals to earn as much as they can, be it ethically or unethically, is where the unethical players (most of them) of the business find out ways to cheat on investors.
We got to go some 6-7 years back to understand the story behind the credit and debit note concept. The interesting fact behind the "NOTES CONCEPT" is that it's a virus that has spread in Just the Delhi NCR area and not any other parts of the country.
The Background
The developers especially the B, C , D category and the new entrants, to sell there over priced products offer some mouth watering "Commissions" "Fees" to the brokers / consultants / agents/ channel partners and that's where the game of "NOTES CONCEPT" start.
As we all understand that the real estate industry in India is the most UNORGANISED sector and provides ample opportunities to uneducated to professionals to earn as much as they can, be it ethically or unethically, is where the unethical players (most of them) of the business find out ways to cheat on investors.
The Modus Operandi
A game where Consultants / Brokers / Agent play the host…..
A game where Consultants / Brokers / Agent play the host…..
Here is it:
The developers who put there intellectual knowledge, expensively sourced technology, efforts, man hours to deliver a project generally offers a set percentage of BSP (basic selling price) (PLC in some cases and mostly does not pay on any other EXTRA loaded costs) to the consultants. These percentages generally vary from 2% - 10% of the selling* price, there are very few consultants who are offered a percent or more not exceeding 3-4 %. So, in nut shell we have consultant with brokerage fee varying from 1-10%-13% depending on location, price and developer.
The developers who put there intellectual knowledge, expensively sourced technology, efforts, man hours to deliver a project generally offers a set percentage of BSP (basic selling price) (PLC in some cases and mostly does not pay on any other EXTRA loaded costs) to the consultants. These percentages generally vary from 2% - 10% of the selling* price, there are very few consultants who are offered a percent or more not exceeding 3-4 %. So, in nut shell we have consultant with brokerage fee varying from 1-10%-13% depending on location, price and developer.
I would now try to explain
the Credit Note scam in consideration to example of Mr Sharma , who wanted to
buy a property on Noida – Greater Noida expressway. Mr Sharma prepared himself
to buy a 3 BHK apartment in a well known developers project , he approached the
developer and enquired about the project. All the available details were
furnished to him by the executive at the developer office. Post studying the details
of the project Mr. Sharma out of curiosity of the full page adverts by the
mushroomed guides, property marts, clinics, lion, cheetah , tigers and various
estate agents , approached few of them. To his surprise, there was a remarkable
difference in the price quoted to him by the developer and the agents.
Interestingly, prices
offered to him by various consultants for the same property were not same too,
and most of them assured him of guaranteed lowest price “bas ek baar meeting kar lijiye sir”.
Finally after days of
research Mr Sharma short-listed one of the very reputed well known agents and
was offered 12% discount on his purchase as compared to 8,9 or 10% offered by other
agents. As expected Mr Sharma wanted to have the additionally benefit of that 4-5% of windfall gain and booked the property. At
the time of booking Mr Sharma was conveyed “as per policy only 2% discounts can
be adjusted ON FORM (developer’s
booking form) and the balance discount of 10% will be adjusted at the time of THIRD INSTALLMENT for which They (the
agent) will issue a credit note
on there LETTER HEAD mentioning the adjustment of 10% discount. Mr Sharma
finalised the booking through the agent and went back home unknown of the fact
that what has happened with him.
The Agent’s office
followed up for second instalment and on
enquiring by Mr Sharma he got to know that the agent through whom he bought the
property is not well hence not come to office. Cheque for 2nd
instalment was picked by some other agent. Same was done by the agent’s office
at the time of the 3rd instalment, but here’s it .
On discussion of the
amount that needs to be paid to the developer Mr Sharma mentioned about the 10%
discount adjustment that was to happen during third instalment, of which Mr
Sharma was told the agent who sold the property to him is no more working with
the company and they can not guarantee/ fulfil false commitments made by an
agent who has been fired cause of cheating, on producing the LETTER HEAD of the
company , Mr Sharma was told the said employee has done the similar activity
with many investors , which was spoiling there name and reputation , is why
they fired him and nothing can be done on the commitment made by him.
Mr Sharma approached the
developer with his concerns and was conveyed about no such information and
documentation has been received from the agent, hence the full instalment has
to be paid. ,Mr Sharma now had two options
a. He cancels his booking
Ø Mr Sharma has already paid 20-25% to the
developer
Ø His cancellation will call for a deduction of
10-20% of the paid amount
Ø He would end up loosing 10-20% of his
investments
b. He continues and pays
Ø Most sensibly the investors continue with the
investment as done by Mr Sharma.
There have been
innumerable cases as above and can be Googled to have a detailed understanding on more such
excuses given to investors by the XYZ agent’s flourishing in every corner of
the city.
In Brief
Credit note
Ø Furnished by consultant to investor for a later
date of adjustment of discount
Ø Extremely high usage in Noida , Greater Noida ,
Greater Noida West (previously known as Noida Extension) by brokers
Ø Very few case of Honoured credit notes
Ø Insist to take a Debit note
Ø Always rely on well known consultants and check
antecedents of pay backs before accepting credit notes.
Debit Note
Ø Rarely used by brokers
Ø Issued by brokers in favour of the developer to
adjust the discount in various instalments over next few months or upfront.
Ø 98% of the consultant will not issue.
Ø Insist for debit note, in original and submit
the Original copy of the debit note
with the developer office in presence of your agent and take a signed receipt
of the debit note from the developer.
In summation I’d recommend
to First buy property at realistic prices , not inflated prices, second don”t
fall for heavy discount , third if required ask for debit notes last but not
the least if picking up a credit not , at least have it from some one who has a
clean transactional experience.
Happy Investing
