One-and-a-half years back, Suddhasatya Samanta, 37, a Kolkata-based merchant navy personnel, stumbled upon an advertisement by General Insurance Company (GIC) about a property auction in the newspaper. Samanta says: �The property was in south Kolkata and the bid price was about 20 per cent less than the ongoing market rate at the time.� Before the auction date, Samanta visited the property site. It was a closed auction, so he put up a bid of Rs 2,000 more than the reserve price and posted it to the address mentioned in the advertisement. On the bidding day, he got a call from the auctioning organisation stating that he had been the highest bidder and that the rest of the amount should be paid within 15 days. An �Acceptance of Bid’ letter was handed over to him the same day. After which Samanta made the payment. He was then handed over a �sale certificate’ and �possession certificate’ along with the original property deed mortgaged with the institution. Due to monetary constraints, he could not get the property registered immediately after he got possession. A year-and-a-half later, he was shocked when Allahabad Bank sent him a ‘possession notice’ and claimed that the same property was mortgaged with them. He moved the court and now awaits its verdict.
In most cases properties auctioned are ready-to-move-in properties. Says Om Ahuja, CEO, residential services, Jones Lang LaSalle India: �The buyer always has that comfort of a clear title of the property. Beyond that, the process involves dealing with genuine sellers where the payment is transparent.� While Samanta started out well, he faltered in the end. Here are a few tips to go by if you wish to buy property through auctions.
Properties on offer. In most cases, these are properties that are already mortgaged and when the borrower fails to service the loan, the lending institution takes possession of the property and sells these properties off through auctions to make up for their loss. These auctions take place under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. Shveta Jain, director, residential services, India, Cushman & Wakefield, says: �Corporate houses, too, auction properties which are historical purchases and their values have gone up quite a bit and they don’t see value in retaining such properties on their balance sheet. So, for them, it makes more sense to liquidate those investments and utilise the funds received through the auction for their core business.� Besides lending institutions and corporate organisations, government authorities under several housing schemes also put up properties for auction from time to time.
The sources. Check newspapers for advertisements citing auctions and websites such as http://tenders.gov.in; http://indiabankauction.com and http://www.foreclosureindia.com/. Typically, about one or two months prior to the auction date, banks and housing finance institutions issue a public notice with sale information in a regional daily and in an English daily. But, when development authorities are involved, the period is longer, as they invite more bidders to auction out larger numbers of housing units.
Types of auction. It could either be an open bid or a closed bid auction. In a closed bid, you send in your bid sealed in an envelope to the auctioneer with a certain percentage of the reserve price as earnest money deposit. In an open bid, a demand draft of the amount mentioned in the notice must be submitted at the venue�”it is refundable if you withdraw or lose the bid.
After you win the auction, submit the earnest money immediately (generally on the same day or on the next working day), failing which, the property will be offered to the next highest bidder or you will have to pay a penalty for defaulting. The rest of the amount must be paid within a month. If the property you bid for was auctioned by a financial institution, your loan for the property, too, can be funded through them.
Must do. As soon as you pay the balance money and get possession of the property, register it in your name. The registered document acts as the legal evidence of all the transactions between the seller (auctioneer) and the buyer.
However, before going for registration, you must collect all necessary documents related to the property, including the original title, agreement of sale, no-objection certificate, occupation certificate and the possession letter from the auctioning authority or institution. Once you get the registered property documents from the sub-registrar, you must also apply for mutation of the title of the property in the municipal department.
