CREDIT NOTE what are they and THE SCAM attached @atulaynehra writes

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.

The Modus Operandi

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.

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 2^nd instalment was picked by some other agent. Same was done by the agent’s office at the time of the 3^rd 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