Consider distressed assets for bargain

Shilpa Phadnis, May 21, 2011, 06.48am IST
 
BANGALORE: If you are planning to buy a house, you could consider buying one going under the hammer. Properties auctioned through the Debt Recovery Tribunal (DRT) provide buyers with an opportunity to buy properties at a bargain price.

Banks and financial institutions auction off distressed assets to recover debts. Properties auctioned through DRTs are advertised in newspapers . If researched and bid upon, these properties could be a good bet for prospective buyers as they are priced much below the market value . "Resale properties have clear titles. Properties are priced 10% to 20% cheaper than current market values. Since these properties are quite old, the valuation is lower . The construction value of the property depreciates depending on how old the property is," said Naresh Dandapat , regional director-South at real estate consultancy Knight Frank India.

Banks are empowered to initiate action against defaulters under the Securitisation Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) to recover the dues without the intervention of the court. The lender/ bank, calls for a public auction where a buyer pays 10% of the reserve price as earnest money deposit (EMD) to participate in the auction. A consortium of lenders approach the DRT to recover their share of dues. DRT is an appellate established under the Recovery of Debts Due to Banks and Financial Institutions Act 1983 and SARFAESI is an Act under the DRT which came into force from June 2002.

Previously, people were wary of buying properties auctioned through DRT, as there were higher levels of negative sentiments towards foreclosure homes. "There is an element of risk when the owner of the asset makes a claim under section 17 of SARFAESI Act," said AV Bagur , director, Bank DRT Informatic Service. But the sentiment is slowly changing as property buyers carry out a thorough due diligence process . "It's zero risk as long as the lender takes adequate measures in putting up the property for auction in the prescribed manner. The buyer of such property can go through the legal documents and papers pertaining to the property in question before deciding to participate in the auction," said Ashok Rao, DGM, Manipal Housing Finance Syndicate.

It's not just the end users eyeing DRT properties. Many realtors and developers find value distressed assets. These could be large parcels of defunct industrial land/ distressed assets where the borrower could have defaulted . A 25-acre BPL property valued at over Rs 100 crore is up for grabs in ITBP, Whitefield , according to sources in the know. Kesarwala Industries' nine acre property in Whitefield valued at over Rs 108 crore is going under the hammer shortly, said an industry source.

There were 3,710 appeals filed at the DRT cell in Bangalore last year compared to 2,092 in 2009, according to sources in the tribunal.

Advantages of Publishing Auction Property Details in ForeclosureIndia.com

FORECLOSURE LISTINGS / BANK AUCTION & POSSESSION LISTINGS IN INDIA FROM JANUARY 2010 TO MARCH 2011

Q&A: Pratip Chaudhuri, Chairman, SBI

'We will try to retrieve some lost ground in corporate banking'
Devjyot Ghoshal /  May 13, 2011, 0:45 IST - Business Standard


It’s not easy to single out Pratip Chaudhuri, the unassuming new chairman of State Bank of India (SBI), from the suit-clad crowd of delegates at the Asian Development Bank’s annual meeting, held in Hanoi recently. In an interview with Devjyot Ghoshal, the helmsman of the country’s largest lender outlines his strategy for keeping SBI ahead. Edited excerpts:

There has been the description of ‘making the elephant dance’ with regard to your predecessor O P Bhatt. What will be your set of priorities for taking the bank forward?


It will not be a dramatic shift. At one time, people almost wrote off public sector banks and thought private sector banks would be the banks of the future. Mr Bhatt made a signal contribution in correcting that and in repositioning public sector banks as banks of certain substance.

Simultaneously, one good thing is that we have narrowed the technology gap with private sector players. The 100 per cent core banking has positioned us almost on an equal footing with private sector banks. So, we don’t have the technology handicap.

I think in the last three years, he (Bhatt) also did a good thing by restarting opening of new branches. For 10 years, we didn’t undertake branch expansion, fearing we did not do any recruitment. That vicious cycle was broken. We recruited more people, and that helped us expand our reach.

It was important because most Indian towns and cities were expanding in new areas and our presence was largely confined to the old areas. Unless we have good presence in the new areas, where the relatively young and affluent people who own new houses are moving to, we will be left out in the cold.

But what will you specifically focus on?

There is a certain feeling that we have done very well in retail, home and car loan markets. In home loans, we have become the leader in absolute and aggregate terms. In retail, at least on an incremental basis, we are the leader, or maybe we are very close to it.

But, possibly, we have slightly neglected our corporate banking franchise. Our endeavour will be to retrieve some lost base. Then there are areas we didn’t enter because maybe we thought they were not very important. But from a headline point of view, I think they are important.


What are these areas?

Areas like bond underwriting and distribution. Though relatively small compared to the loan market, it is largely dominated by Axis Bank and YES Bank. We would like to position ourselves in this.

There were some human resource concerns. What is the current situation?

There were concerns in a number of areas. One was the average age. That has been corrected to a large extent with youngsters coming in and more older people retiring. But the kind of people we are getting is important because we also have a rural network. You may get good people but they may not be willing to relocate to rural areas.

And today, banks not only have to deal with deposits and loans, they also have to offer insurance. Our young people need to learn new skills.

What about the status of non-performing assets (NPAs)?

A lot of good things have happened but one area where we have possibly trailed other banks is our net NPAs to total assets. We are higher than the median.

We are trying to put more energy into this. We have put a deputy managing director-level officer in charge of this, expecting a better and faster resolution of NPAs.

Futile Central Registry Rules impose a heavy burden on banks

April 30, 2011 04:14 PM- Vinod Kothari


The SARFARESI Act does not fulfill the purpose of registration of security interests. For, the Central Registry does not guarantee reliability. Therefore, the law as it stands is a futile and very costly exercise

Banking: Easier provisioning

Source :BS :Malini Bhupta / Mumbai April 26, 2011, 0:07 IST

Banks will benefit from the changed norms as credit costs will come down.

The Reserve Bank of India (RBI) unexpectedly relaxed the provisioning norms for non-performing loans (NPLs) last week.

Unlike the past, banks will now have to maintain a provisioning coverage ratio (PCR) of 70 per cent for gross NPLs as on September 30, 2010, after which they would be free to make provisions for incremental NPL formation, in accordance with their internal policies.

Banking leader State Bank of India dropped ‘prepayment charges' on all its loans over the past fortnight.

Mon, 02 May 2011 00:35:12 -0600 

The much-talked-about prepayment penalty on home loans is on its way out.

Banking leader State Bank of India dropped ‘prepayment charges' on all its loans over the past fortnight. The announcement conincided with the hiking of the bank's base rate and withdrawal of the controversyal teaser home loan schemes.