Right time to invest in Auction Properties
Real estate sector experts say that bank auctions often offers sizeable discounts. The discounts can be as high as 20 to 30 percent Property auctions are a goo dplace to buy homes, commercial property at discounted prices. And to add to the price advantage, most of the time property(s) are ready to occupy with minimum or no repairs.
Every year hundreds of thousands of property(s) are put up for auction by banks & financial institutions after the borrowers default on homes. In most of the cases, the borrowers giveup on the property as the outstanding amounts against loan repayment are much higher than the value of the property. In some cases, the borrowers resist the repossession of the property and eventually after legal process they give up.
So, not all properties are litigation properties as generally thought by the people. With Courts & Parliaments passing Acts like SARFAESI, the repossession and sale of the properties under defaulted loans has become slightly easier for banks & financial institutions with the potential buyers interest adequately safeguarded. And it is safer for the buyers of such properties. During the year 2020-21, banks have initiated SARFAESI proceedings on 57,331 A/cs involving an amount of ₹67,510 crores and have recovered around ₹27,686 Crore.
Under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, the creditor has precedence and first charge over the secured assets.
A Division bench of the High Court comprising Chief Justice Ritu Raj Awasthi and Justice Sachin Shankar Magadum observed in an appeal against the mortgaged property has said Even if the appellant had any right under section 65-A of the Transfer of Property Act, in terms of section 26-E of SARFAESI Act, the secured creditor has precedence and first charge over the secured assets and it is well within the bank’s jurisdiction to proceed against the assets,”
Many people are buying properties through Auction route. There has been increased participation by the investors, households, young employees in buying auction properties. Banks & Financial Institutions are also making efforts in making the information of such properties available to the public at large through newspaper adverstisements and listing on auction websites. Every now and then Auction melas are conducted where distress properties are consolidated and auctioned on a single day.
And for the convenience of the potential buyers, the banks and financial institutions are increasingly conducting online auctions. The buyers can participate in the auction from the convenience of their homes.
The auction properties also offer the advantage of ready to occupy. The buyers can move in to the properties within few days of getting the sale registration. The Sale Certificate registered by the banks and financial institutions is a legally valid document and gives title to the buyers. With the help of regsitered Sale Certificate, the property can be transferred, sold or mortgaged to any financial institutions for availing finance.
Sometimes, the properties require minor repairs, cleaning, paintings, which cost few thousand rupees. Even after this expenditure, the properties still remain very competitive.
Few of the auction properties are located in prime locations with excellent connectivity making them lucrative. One needs to keep a check on the address of such properties coming up for auction.
To add to the above advantages, the banks and financial institutions are to follow the guidelines stipulated by SARFAESI Act / DRT for sale of the properties in a fair and transparent manner. All the steps followed are intimated to the potential buyers in advance and hence there is no scope for manipulations.
It is the right time to invest in auction properties.
(Contributed by Sudapalli Jaya Prasad Rao, Banking & Technology Professional)