Biggest Real Estate Profile Funding Scam

Profile Funding is one of the most deceptive and widespread scams operating in today’s real-estate sector. It is commonly used by certain builders and their agents to exploit the financial aspirations of ordinary homebuyers.

Every person dreams of owning a home in their lifetime. Builders take advantage of this sentiment. They lure individuals with attractive promises—assuring them that they can own a well-designed property at a young age and that too without paying anything upfront.

How does the profile funding scam actually work?

To purchase a property, a buyer needs funds—usually through a home loan. Banks typically require around 5% of the loan amount as the buyer’s down payment before sanctioning the loan.

profile funding scam

Here is where the trap begins:

Builders identify individuals who do not have sufficient funds for the down payment. They approach them through agents and offer a “golden opportunity”:

“We will arrange the down payment for you. You don’t need to pay anything.”

To gain the buyer’s trust, the builder pays the 5% down payment directly to the bank on behalf of the buyer. Once this amount is deposited, the bank disburses approximately 85% of the loan amount—which goes straight to the builder.

In simple terms, the builder receives almost the entire property cost by paying only 5%.

To make the offer even more convincing, the builder assures the buyer:

“We will pay all your EMIs until possession is handed over.”

Where the fraud begins?

Initially, the builder pays the first few EMIs—generally for 3 to 4 months. However, after that, the payments suddenly stop.

As a result, since the loan is registered in the buyer’s name and not the builder’s, the bank begins recovering the outstanding dues from the buyer. Consequently, when the EMIs remain unpaid, the bank marks the buyer as a loan defaulter and initiates legal action.

Meanwhile, the builder remains untouched. In fact, no bank questions him because, legally, the liability falls on the buyer.

Moreover, the Bank, in connivance with the Builder, disburses the entire sanctioned loan amount to the builder in one shot, without checking the actual stage of construction of the project.

However, as per RBI guidelines, the Bank cannot release the entire loan amount in one shot for an under-construction property. Instead, the disbursement has to be linked to the stage of construction of the project.

This arrangement is known as CLPP (Construction Linked Payment Plan), under which the loan amount is released progressively, based on the construction progress of the project.

Do victims have any legal remedy?

Yes, despite the seriousness of the profile funding scam, victims are not without options.

Aggrieved buyers can file complaints for refund and compensation against the builder before:

* RERA (Real Estate Regulatory Authority)

* Consumer Court

In my opinion Consumer Courts are far better than RERA.

Apart from this, you can also file a Petition Before the High Court or Supreme Court whereby the Court will ask the bank to stay the Recovery of EMIs from the Homebuyers till further orders.

As on date, the Supreme Court Petition is highly effective as Supreme Court orders CBI enquiry into the entire Project of the Builder which is very harmful for the builder and Builders settle the matter immediately upon filing of the Supreme Court Petition.

For further query, please contact us on 9999340256 or 9958617492

FAQ’s

Q1. I was told that I could buy a flat without paying any money upfront. Is this a scam?

 It can be a serious red flag. If a builder or agent tells you:

“You don’t need to pay the down payment.”

“We will arrange the down payment.”

“We will pay your EMIs.”

“You don’t have to worry about the loan.”

“The property will pay for itself.”

“Just sign the loan documents and we will take care of everything.”

you should be extremely careful. Not every arrangement with financial assistance from a builder is automatically illegal, but you should understand exactly where the money is coming from, who is responsible for the loan, and what documents you are signing.

 Q2. Why would a builder pay my down payment?

In a suspected profile-funding arrangement, the builder may pay the initial amount so that the buyer becomes eligible for a home loan. The builder’s objective may be to get the bank to release the loan amount for the property.

The buyer may believe that the builder will continue paying the EMIs, but if the builder stops making those payments, the buyer can be left with the entire loan liability.

Q3. The builder promised to pay my EMIs. Am I still responsible for the home loan?

A3. Usually, yes. If the home loan is in your name, the bank generally treats you as the borrower. A private promise made by the builder or his agent to pay your EMIs does not automatically remove your responsibility towards the bank.

This is why victims can suddenly find themselves facing bank notices, overdue EMIs, interest, penalties and possible recovery proceedings.

Q4.The builder paid my first few EMIs and then stopped. What should I do?

A4. Do not ignore the situation. Collect all evidence showing that the builder or agent promised to pay your EMIs, including:

WhatsApp messages

  • Emails
  • Audio recordings, where lawfully obtained
  • Brochures and advertisements
  • Payment receipts
  • Bank statements
  • Loan documents
  • Property booking documents
  • Agreements
  • Messages from the builder or agent
  • Proof of payments made by the builder
  • Details of the agent who introduced you to the scheme

You should also obtain your complete loan account statement and seek advice from a lawyer experienced in real-estate and banking disputes.

Q5. Can I complain against the builder under RERA or Consumer Court?

Potentially, yes. builder buyer dispute generally falls within the scope of the applicable RERA law or consumer law, you may be able to approach the concerned Real Estate Regulatory Authority or Consumer Court for appropriate relief.

The exact relief available will depend on your documents and the facts of your case.