Durugan, 68, had been missing since last Thursday along with her son, Sagren Pillay, 46.
On Wednesday night Pillay's badly decomposed body was found in a bush at the Nature Reserve by two passerbys.
Police have opened an inquest.
Police spokesperson, Thulani Zwane, said it appeared Durugan had been murdered and her body thrown into the dam.
The neighbour, who did not want to be named, said Pillay had given her R20 000 at the end of November and told her it was for his mother's funeral.
“When he came with the money we were shocked. However, I was not suspicious because he cared for his mother.”
Pillay’s abandoned Toyota Corolla was found parked at the Nature Reserve. The vehicle was traced by police. They went to his home, where neighbours told them Pillay and his mother had not been seen for days.
In an interview with East Coast radio, Durugan’s daughter Kogie Reddy said her husband went to her mother's house on Thursday.
“He hooted for them but no one came out. I found out after 6 pm that no one was at the house. My brother’s phone just rang and my mother’s walker and wheelchair was at home. I need some answers...”
According to a source, Pillay allegedly wrote a note addressed to his family saying that they won’t see their mum again and that he left money with neighbours.