When you think of auctions, do you instantly imagine an auctioneer wielding a hammer declaring that an exotic artifact is “sold”? If you do, you are not too far off the mark, as auctions in India seem to have been an exclusive affair for the rich for a very long time. Auction houses regularly sell antiques and collectibles at sessions attended by avid collectors and connoisseurs. But did you know that auctions can also help you get good deals on properties?
Commercial and residential properties, financed by a loan, can be foreclosed and auctioned by banks and other lenders if the borrower does not pay three consecutive IMEs. After three missed IMEs, the lender sends 60 days’ notice to the borrower to raise an objection. Following this, if there is no objection from the borrower, the property is repossessed or seized. The lender then puts the property up for auction to collect the dues. This is called the foreclosure auction.
The lender publishes advertisements in major newspapers calling for tenders. Notifications are also posted on the lender’s website and other social media platforms 30 days before the auction.
The value of the property, determined by an appraiser appointed by the lender, is usually significantly lower than the market price for properties of the same class and area, as the price in this case is not artificially inflated.
To bid on foreclosed property, you must submit your sealed bid with a minimum reserve price amount to the bank. Once the auction period is over, the bank proceeds to the auction and sells the property to the highest bidder.
Bidding on foreclosed property seems complicated and unapproachable, but that is changing now. Online auctions or electronic auctions are gaining popularity in India. Some real estate portals have set up online auctions of real estate seized under the SARFAESI law (securitization and reconstruction of financial assets and realization of collateral). Several banks have also started to organize online auctions by partnering with third-party auctioneers or real estate portals.
A few sites like foreclosureindia.com and bankeauctions.com act as aggregators by listing various properties auctioned by different banks. These websites provide basic property details, bank details, and the date of the auction. The properties are held until they are sold. This gives you the flexibility to browse and select properties in one place instead of searching each bank’s website or waiting for notifications.
This brought a higher degree of transparency to the process and ended many debates about the rigged auction process.
However, there is still no way to make sure that real estate sharks don’t go into auctions and exclude regular bidders.
Never miss a story! Stay connected and informed with Mint. Download our app now !!