Watch out for any unpaid dues, taxes and society bills the previous owner could have defaulted on
Yogini Joglekar | Mumbai April 21, 2013 Last Updated at 21:27 IST
Shashi Nair, a Mumbai-based advocate, bought two houses in Chembur and Vasai in 2005 and 2010, respectively, through two different bank auctions. Nair purchased these properties from banks that opted to take recourse under Section 101 and the Debt Recovery Tribunal (DRT) Act.
The most common Acts under which banks take recourse are the DRT, state-specific Co-operative Housing Societies Act, and the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act.
The Sarfaesi Act, 2002, allows banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans.
It helps banks reduce their non-performing assets (NPAs) by adopting such measures for recovery.
According to NPAsource.com, the net NPAs of 40 listed banks rose to Rs 92,398 crore in December 2012 from Rs 61,558 crore in March 2012. There were about 23,000 registered properties for auction, worth Rs 21,000 crore. Of these, 8,548 residential flats and 1,846 commercial properties are up for auction.
Ram Sangapure, general manager at Central Bank, says, "Most banks today recover their NPAs under the Sarfaesi Act, as it is faster, hassle-free, and empowers banks to do so without the intervention of the court."
Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, says, "Usually, houses bought under the Sarfaesi Act are up to 15-30 per cent cheaper than the prevailing rates of homes in that area. This is because demand for such homes is low, as very few people know about this channel and also banks don't stress on a high price as long as they can recover their losses." Buying through this channel saved Nair as much as Rs 8-10 lakh than the prevailing rates in those areas. Valuations of bank-auctioned homes tend to be on the conservative side, as it is a distress sale.
Properties under Sarfaesi Act
If the borrower defaults on repayment of his/her home loan for six continuous months, banks give the borrower a 60-day period notice to regularise his repayments. If the borrower fails to do so, banks will issue another 30-day period notice. If the borrower doesn't pay even in this period, his or her loan would be declared an NPA. This is when banks will auction his mortgaged property to recover their loan.
Bank issues notice about possession
If the borrower still fails to repay the loan, the bank will take possession of the property that has been kept as mortgage or collateral. The bank can take the help of the police in case the borrower doesn't part with his property. After the property is under its possession, the bank will issue a notice in newspapers. This is when potential buyers should prepare themselves and wait for bank's auction-notice.
Wait for the auction-notice
The bank now hires a government-appointed valuer, who will value the property and arrive at a reserve price (RP) or a minimum bid price. It is a price below which the bank is not allowed to sell that property. If the price fetched exceeds the bank's dues, the excess amount is given to the borrower. Only after arriving at the reserve price, will banks advertise auction-notice. They can publish this only in one English and one regional newspaper, 30 days prior to the auction.
Since information about such notices is limited, one can also look at websites like foreclosureIndia.com and NPAsource.com. These portals give information about the latest properties that are up for auction by banks. However, to register on NPAsource.com, you will have to shell out Rs 18,000 annually to view some 1,000 NPA notices in a year across India.
How to participate in the auction
Interested bidders must submit their bids in a sealed envelope to the bank. Along with the bid, the bidder has to pay 'earnest money deposit'. This deposit is usually 5-10 per cent of the value of the property auctioned. However, this deposit will be refunded in case the bidder doesn't win the bid. Some banks may also charge a nominal fee as tender fees. On the auction day, the sealed envelopes are opened in front of the bidders and the highest bid is announced.
Bidders may or may not get another chance to revise their bids. If the bank has failed at achieving the reserve price, they may postpone the auction or even reduce the valuation of the property. This revision may take another two-three months.
What if you win the bid?:
You have to pay up to 25 per cent of your bid amount within 24 hours to confirm the purchase. The balance amount can be paid in a month or two. This time period given to the buyer varies from banks to banks.
R K Bansal, executive director (retail banking) at IDBI bank, says, "If the property value is huge, the buyer can negotiate with the bank and discuss the tenure within which he can pay the balance amount. The buyer can also get loan to buy that property, if he has a decent credit score."
Since the bank had previously lent against the property, there is clarity on property title. However, these properties are sold on an 'as-is' basis, which means the properties are sold just the way it had been possessed.
"Since the property has been possessed by the banker forcefully, there are chances there may be pending dues or even litigations. For instance, the owner may have some unpaid property taxes, electricity/water bills, society dues and so on. Hence, don't get carried away by the low price of the house, there are chances you may have to pay for such liabilities," says Anshuman Jagtap, advocate at Hariani & Co.
Banks may or may not have information about such liabilities, so it's best to hire a property lawyer and check for such loop-holes before finalising the deal.
http://www.business-standard.com/article/pf/bank-auctioned-homes-may-be-cheaper-113042100495_1.html
Monday, April 22, 2013
Tuesday, April 9, 2013
Foreclosureindia.Com Started E Auction Services For all Banks In India Thru BankAuctions.IN Portal
According
to Ministry of Finance, Government of India directives, All NPA’s shall be sold through E Auction
only. Free foreclosure listing service
provider, Foreclosureindia.com has
started secured portal BankAuctions.IN for providing E auction services to all
Banks, DRT’s to sell NPA’s online.
Foreclosureindia.com
is the one and only website in India listing the auction properties of all the
banks and financial institutions across India since Nov 2009. It's the first of
its kind internet portal that helps the buyers of property in getting the free
access to all auction property details / free foreclosure listings information
of banks and financial institutions happening in and around 34 major cities of
the country. During the last one year it has achieved its mile stone about
visitors and page views. The details are reported as detailed below.
No of total visits to the site -
1,343,374
No of unique visitors - 652,724
Total number of page views -10,458,830
Returning visitors -
52.05 %
Visitors came from -
45554 cities & from 212 countries.
Average viewer ship of each auction property listed is 485. Foreclosureindia.com has set a target of 100 %
growth during the present financial year.
The advantages of “e –
publicity” through it are explained
as detailed below.
- Free
access to all visitors, unlike some portals is charging Rs 1050 to 2500
per month to show the auction property details.
- E
mail alerts are being sent to 49000 plus registered users on daily basis.
- It
is displaying the Auction properties details in two other real estate
websites also, along with displaying in their portal.
E – Auctions may eliminate
cartelization and facilitates NRI’s to buy properties online. Foreclosureindia.com’s spokesperson informed
that “they have developed a fully secured online portal for E-Auctions as https://www.BankAuctions.IN. The
complete process from Creation of Events, submission of first round quotes by
bidders, evaluation and final auction will be done online to enable
transparency in transactions, strictly adhering to all the requirements of
Ministry of Finance. https://www.BankAuctions.IN has easy interface to enable all the investors / bidders with little knowledge
of Computer and internet to participate in these property auctions. It
maintains complete confidentiality & privacy for the bidders and Banks.
All
the Debt recovery tribunals are conducting E Auctions to sell secured
assets. A good number of Banks have adapted
to E auctions for selling of some of the NPA’s. Foreclosureindia.com has
started secured portal BankAuctions.IN for providing E auction services to all
Banks, DRT’s to sell NPA’s online to Indian Public and non resident Indians
working in different countries.
The State Bank of Hyderabad, ChaitanyaGodavari Grameena Bank, Guntur and Andhra Pradesh Grameena Vikas Bank, Warangal
has empaneled BankAuctions.IN for conducting E Auctions. More than 10 public
sector Banks & private sector Banks are processing their empanelment
requests for conducting E auctions. It
targets to conduct 6000 E Auctions of NPA’s during this year.
The
advantages of conducting E auctions through BankAuction.IN are explained as
detailed below.
- Success
rate of selling of properties will be more, as BankAuctions.IN is
providing wide publicity to NPA properties. Others are only conducting E auction.
- Price
for conducting E auction is lowest
when compared to all other service providers.
- Non
performing assets disposal is the only exclusive activity for BankAuctions.IN,
where as it is non core activity for other E Auction service providers.
ForeclosureIndia.com requests the Banks, DRT’s ,
Housing finance companies, State Finance corporations, all other Organizations
disposing of non performing assets under SARFAESI Act & DRT acts to utilize
their e publicity and also their E auction facilities.
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