Following in the footsteps of State Bank of India (SBI), Canara Bank will conduct a mega e-auction of properties in more than 30 cities on 21 November, which will include apartments, shops, offices, open plots, factory buildings and others. “Of the total 1,300 properties, more than 50% are residential and the rest are commercial. The total estimated value is Rs.964 crore,” the bank stated in an email response.
Large e-auctions have become the preferred way for banks to sell properties on which borrowers have defaulted. For example, in 2015, Dena Bank and Indian Bank also conducted e-auctions. But the biggest ones have been from SBI, which has conducted three e-auctions of residential and commercial properties, the most recent of which was on 11 September. Along with its associate State Bank of Travancore, it put on auction around 625 properties valued around Rs.1,000 crore. In all the three auctions, properties worth about Rs.350 crore were sold.
Properties that Canara Bank is auctioning are also those that it has seized under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (also called the Sarfaesi Act).
For the e-auction, the bank has tied up with three service platforms—bankeauctions.com, bankeauctionwizard.com, and canarabank.auctiontiger.net. You can find the list of properties and details such as description, reserve price, time and date to inspect the property, auction timings and process, and even the earlier borrowers’ details and outstanding loan amount on these websites. Canara Bank plans to conduct such auctions periodically to reduce its non-performing assets.
Apart from mega e-auctions, many banks and financial institutions also regularly auction smaller number of properties, details of which are available on the e-auction websites.
“Given the current market conditions, buying a property in an auction could be beneficial. One can buy at even 15% discount to the market price,” said Gulam Zia, executive director, Knight Frank India. If you plan to buy such a property, here’s how to go about it.
Check the details of the properties either on the bank’s website or auction portals. The entity selling also has to publish notices in two leading newspapers, one of which has to be a national daily and the other a regional language publication. These advertisements are also a good source of information to scout for properties in your city of preference. “There is no fixed date or duration of such auctions. So, one has to keep watching or surfing e-auction websites to find a good property to bid on,” said Zia.
If you spot a suitable entry, then take note of its reserve price, date and timing of auction, and date of inspection or visit. “A distinct advantage with such properties is that titles are clean,” said Zia. But one should inspect the property before participating in the bid. While these have been put on sale by lending institutions and, therefore, already have a certain level of verification, one should still do the required due diligence. Don’t rely solely on information provided by the lender because if there is a dispute later, it may not entertain your claims once the property is sold. Ideally, one should take the help of lawyers and property experts before participating in an auction.
When buying a property in an auction, the amount of time given to pay the full amount is very less. Therefore, arrange for the funds before participating. While the full amount does not have to be paid immediately, an earnest money deposit (EMD) is needed. This is usually 5-10% of the reserve price (minimum or base price of the property fixed by bank). Along with that, you have to submit know-your-customer (KYC) documents such as copy of Permanent Account Number (PAN) and address at the stated bank branch.
You also need to have a valid digital signature. If you don’t have one, you can approach either the e-auctioneers or any other authorised agency. Once the EMD and necessary documents are submitted, the e-auctioneer will send you a login ID and password on your email. On the day of the bid, you have to login to the e-auctioneer website and place your bid.
If you win, you have to pay 25% of the bid amount (EMD gets adjusted in this) to the bank on the same day. The balance 75% has to be usually paid in 15-30 days. The bank will issue a certificate of sale only after the entire amount is paid.
You can apply for a loan as well, either from the same lender or another one, provided you fulfil its loan eligibility criteria. If you plan to fund the purchase with a loan, it is better to get a pre-sanctioned loan letter from the bank. This will help you save crucial time.