Scams in land banking

A typical land banking scheme involves a field on the edge of a village where the building plots are offered at a price way below the market rate. The sellers claim a huge value increase once the land is zoned for development.

Despite widespread publicity and media exposure, people still fall victim to such bogus land banking schemes where the hope value of the land is often exaggerated, leading to fraud. 

How Does It Happen?

Such schemes are offered to unsuspecting targets who are far less likely to be duped. The fraudsters offer the scheme on phone calls instead of advertising, and they use high-pressure selling tactics, emphasising the need for quick action. 

Many who invest in such plans have no intention to buy a house or any plot, but they are lured into the hope of making huge money in future.

Some such investments are offered in place of great historical value or natural beauty, where it isn't easy to construct new homes. The seller requests or pressurises for an early payment and disappears after getting the victim's money. 

Sometimes, investors' contact details are gathered through emails, phones, seminars or at exhibitions. These sellers provide brochures and marketing material about the property, location, or plots, which are shown on maps, and the messages explain- how to invest and how it will work. 

The buyers are assured they will gain once construction and development plans are approved. Most decision-makers take years to approve such developments, while investors hold money in some valueless land for years.

The land bankers fail to communicate about the issues related to such investment, like if there are certain complex legal restrictions on construction in certain areas or if there are other government-approved plans, for example, a plan to build a commercial area, train junction or a gas filling station. 

In most such cases, even the follow-ups of years may not yield any output, and the money may be stuck without getting you anything in return.

How To Prevent Such Fraud?

If the plot does not come under planning permission, you must check the scheme's viability with the local authority and ask if the plot will even get planning permission.

One should seek financial advice before investing in land banking schemes as the money stuck in such schemes is lost if not protected by the authorised organisation. FOS and FSCS have regulations to prevent such fraud.

If you are offered land overseas, you should contact local government authorities to buy land. Ask the local authorities to find and get information about where and when the land will be available for sale and enquire about the developments or government plans related to the development area. Visit the site or check the planning schemes.

Not all opportunities without planning are scams, but sometimes plots or houses are sold with the hope of getting permission in the future, and the victim fails to distinguish between a difficult plot and a scam. You must contact a local planner to know the truth. 

How To Handle A Collective Investment Scheme?

Collective investment schemes involve investing in plots where the buyer has no access to their plots, and the operator takes care of the property at their end. Any firm offering a collective scheme to operate as a CIS cannot function without approval.  

If you lose money in such deals, report to the consumer helpline number. Sometimes scammers may call for money back or alternative exit deals – where you may be asked to pay an amount to get a better plot or as a fee to sell the plot. Even the offers to buy back are a scam.