On February 26, 2020, SBI (State Bank of India) is about to hold a mega e-auction of around 1,000 plots, commercial property, residential property and industrial property. To recover the charges from borrowers, that is the reason SBI is auctioning these Non-performing assets.
These properties are the ones that are guaranteed as security for housing & Business loans which are taken by bank under the Security and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act due to failure of money and pending charges by the borrowers. Notice period of 60 days were given to the defaulters under the Sarfaesi Act, from which properties were auctioned.
If the loan amount is not paid by the borrower so it directly starts with the legal process and retake possession of the property and then it is e-auctioned. Valuers are always enrolled who check the details of construction, location and the area before valuing the property. Reasonable value which we received by them helps us set the reserve price that is disclosed to the opposition in advance. As per the bank official, those who are interested in bid have to deposit an amount of 10 -15% property value.
There should be no misunderstanding between property buyers that these properties are always under legal issues attached to them. According to the bank official, if there is no clear legal title, banks will not auction properties so it is important to have a legal title. Even prices of these properties are mostly around 5 - 10% less than the market value,so it is better to sign up for the auction. As it is a deal directly done between the buyer and bank so no brokers and agents are involved in it.
According to the act, candidates who are signing up for the e-auction have to pay 10 percent of the amount that is set for the afflicted property that is returned if not successful by bidder and if he is successful then the amount will be adjusted in the final price.
If the borrower is not able to repay the loan amount then the banks take hold of such properties. Once the borrower fails to make payments, then the property is auctioned by the lender to recover the outstanding principal and interest amount.
Hence most people always or should, look for new or resale properties only in the budget which they can repay. For finding budget properties, visit 3BRICK.com (real-estate website and android app, where end user can search for property and submit their own offer price against the builders quote)
If there are any residential properties which are auctioned, buyers need to authenticate if any "liabilities associated with the property that is being auctioned".
Candidates who are in an e-auction bidding for the property are allowed to check the property, and even from the society to check if any dues pending against the property. Sometimes there are cases of subletting and banks don't know about it. In such cases property buyers who have purchased properties won’t be able to sell it without the approval of the tenant. Sub-tenancy could lead to its own share problem. Buyer will not come to know before only he should go and reside in it.
If the property buyer is planning to apply for a property loan so the buyer should get in-principle home loan approval from the lender. Banks provide approval for loans only on the basis of analysing the credit history and repayment capacity. If the loan is sanctioned on the terms and condition by the bank then the bidder has to complete all the formalities like property registration charges, stamp duty and other legal costs and need to submit the valid property registration document with the bank, that is before the payment of loan.