Agents are recently controlling this process and customers end up paying hefty commission in cash. Although an expert property lawyer will never advise an investor to pay in cash during any property transaction process, but people generally tend to overlook the risks involved with a desire to buy bank auction properties at much discounted price. Properties bought through bank auctions in West Bengal and Kolkata usually generate investor interest since they are mostly priced much lower than the existing market prices. So, let’s discuss if it’s safe to buy such properties and what safety measures an investor must follow to avoid any kind of legal fuss while buying bank auction properties in West Bengal and Kolkata.
Reasons for Property Auction:
When a borrower defaults in payment, the property gets auctioned. Usually, a bank initiates the auction process when the borrower fails to pay 3 consecutive Home Loan EMIs. The borrower gets a recovery notice asking as to why the bank should not initiate the auction process because of default in payment and the time limit to respond to this notice is usually 60 days. If the borrower clears all the due amount, the notice gets withdrawn. Else, the borrower can respond to the recovery notice within 60 days stating his objection with justification for non-payment of the monthly instalments. If the bank gets no response or receives any inadmissible reply, the auction process is initiated. After the expiration of the recovery notice period of 60 days, the bank can initiate the property auction process after 30 days under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act), 2002.
Risks Involved in Buying Auction Properties:
As a property investor one needs to be very careful while buying a property through bank auction as the auction notices generally have some clauses. Auction notices typically use legal terms like “as is where is” and “whatever there is” which indicate that the bank is auctioning the property based on the present physical and legal conditions, including any restraints. The auction notice also clearly indicates that the bank cannot be blamed for any legal complications and whatever happens to the property after the auction process is done is the buyer’s liability.
Experienced property consultants cite various instances where the buyers discovered that the property had encumbrances or the main borrower had a court order restraining the bank auction after the auction process has already been completed. Investors faced situations where the property was up for bidding under the guidance of the Apex Court, but the registration office could not transfer it to the new owner due to existing property disputes.
Get your due diligence done by an experienced property lawyer before you participate in the bidding process is very important before buying bank auction properties in West Bengal and Kolkata. Banks generally provide updates of an upcoming e-auction well in advance and it has details about the addresses and sizes of the immovable assets, information about the past owners and other property related information that you can check online under the electronic auction process.However, these details must be verified by the individual investors and auction property buyers because in case of any complications after the auction process, the bank will not take any responsibility and cannot be held liable. If you wish to buy auction properties in West Bengal and Kolkata, then personally visit the bank and get the documents verified by your property lawyer.
How Much Money Is Saved?
In case you are planning to buy a property through bank auction in West Bengal and Kolkata, it is advised to directly participate in the bidding process without any intermediaries. Many banks have recently launched e-auction platforms which are safer and more convenient. Property experts say that these auctions offer hefty discounts which is difficult to find anywhere else. According to the MD Residential Services at Cushman & Wakefield Mr. Shalin Raina: “the discounts can be as high as 20 to 30 percent, which make it lucrative specially for investors”. The location of the property also plays a major role as it helps you to decide which property you should invest in. “There is also a possibility of such assets being in prime locations in cities,” says Raina.
While this may sound very lucrative to some, let us discuss the downside of the process. Apart from selling the property on “as is where is” basis, State Bank of India has clearly stated that all statutory and non-statutory dues, charges, fees, taxes and so on will be the liability of the investor. Such payments can eat up majority of the benefits of the discounted prices. If not paid on time, some of these charges can cause you some extra interest penalties as well. The investor also needs to take care of the repairing and maintenance cost of the property.
If the property belongs to a society, the investors with the help of the bank officials can check if there are any pending dues when they go to inspect the property. There is a possibility that you still will not get all such details on your own, so it is advisable to seek help of a property lawyer in Kolkata who can guide you in buying bank auction properties in West Bengal and complete the due diligence on your behalf.
Process of Buying a Property Through Bank Auction:
- Search for bank auction property:You can search bank property auction details for free online and some paid information are also available online. The only problem is that these sites are not updated on a daily basis. You can also get some details available on newspapers, auction notices posted in bank branches or public notices posted by the banks regarding bank auctions.
- Check property details: When the shortlisting of the bank auction property is done, you should do the preliminary inspection by yourself or seek help from an experienced property lawyer in Kolkata. Details like the market price of the property, legal disputes if any, information on the bank auction and how to participate in that auction must not be avoided. Since the sole purpose of the bank is to dispose of the property, they do not share much information. In this scenario, if you are interested in the property, take help of an experienced property lawyer.
- Physical Inspection of the Property: One of the most crucial things to remember is to focus on the properties where bank has physical possession. Otherwise, once the auction is over, the bank will not cooperate with any kind of possession issues.
- Submitting the tender form: The next and fourth step is to collect the tender form. While depositing the duly filled tender form, you also need to deposit the Earnest Money Deposit (EMD). Get your KYC ready as well in advance because the bank may ask for it.
- Participate in the BiddingProcess:In offline mode, one needs to submit the bid through the tender form. You can choose to place multiple bids and for each bid you have to submit a different tender form. Sometimes, the tender form has to be submitted physically while the bidding process is conducted online. Apart from the offline process, the e-auction process is the most standard bidding process in today’s world. Investors can bid multiple times during the e-auction time. In certain cases, banks allow competitive bidding to increase the final selling price.
- Payment Details: On the auction date, if you are the declared winner, then you must deposit the EMD and 25% of the bid amount along with the tender form has to be submitted within the next 24 hours. The rest of the amount needs to be cleared within next 15-30 days. Do not rely on home loans as banks generally are not willing to lend on such properties. “Bidders, therefore, need to have enough cash or they would need to arrange money through other means. If you don’t get a home loan, there won’t be any deductions available on income tax for repayment. Factor such costs before bidding”. This is a very crucial point because unlike regular properties, bank auction properties in West Bengal and Kolkata require upfront payment.
- Sale Certificate: Once you clear all your due payments, the sale certificate will be issued by the bank in your name. Until you register the sale certificate in the sub-registrar’s office, the title transfer remains pending for the bank auction property.
- Registration of Sale Certificate: The last and final step of the property auction process is to register the sale certificate in the sub-registrar’s/ Registrar’s office. While registering for the property, the inclusion of the defaulter is a must. This document must be duly signed by the authorised bank executive during the property registration.
Points to Remember:
- The auction takes place after 30 days of the auction notice. In case the borrower clears the due payment within this period, the auction is cancelled.
- In case after winning the bid, you fail to make the payment within the given time, your entire payment will be forfeited by the bank. However, if you do not win the bid, then your EMD will be refunded.
- Auctions organised by the PSU banks are comparatively cheaper than those of the private banks.
- Do get a fair idea about the market price of similar kind of properties before taking part in the bidding process and conduct due diligence with an experience property lawyer in West Bengal and Kolkata.
Since most of the properties offered in the bank auction process have some kind of legal issues involved, and since most of the time the bank will not entirely disclose what exactly the issues are, the investors are advised to seek help from an expert property lawyer in this matter. For better guidance with bank auction properties and to safeguard yourself, contact here or email [email protected] with your queries.