How safe to purchase property in auction?

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By Staff Reporter

When EMI is not paid either by the individual home buyer or the Builder on loan taken from Banks and Financial Institutions, the loan is treated as bad loan after two months and banks need to treat it as Non Performing Assets (NPA).

Bank then either transfer to their own Stressed Assets Branch / division or sell to Assets Reconstruction Companies (ARCs) recognised by RBI.

And one more category is when Collector attach the properties either on recovery warrants issued by RERA or by courts.

These ARCs / Stressed Assets branch/ Tehsildars then try to sell these properties in the open market through auction.

Now, Why these auction is very very risky?

These ARCs/ Stressed Assets Branch or Division or tehsildars first value the properties as per fair market value and get “Possession”. These possession mostly are “Symbolic Possession” where some tenant or encroachers are occupying these properties and not auctioned as vacant possession. Few properties also are on “Physical possession” hwere the financiers have got the physical possession while break open the locks through Police help with Panchnama of belongings in the properties.

The risk is the offer in auction is “As it is Where it is basis” “Without any recourse basis”. It means the properties will come with all encumbrances , embargoes, litigations, statutory claims from Income TAX, GST OR REVENUE RECOVERIES. Secondly the possession is the headache of the successful bidder. For biddings, one has to deposit a deposit as reserved price in the auction. Which can be forfeited if you fail to pay further as per your bid.

These properties are valued at much higher value of the fair market value which are competing with normal property prices. Hence neither the discounted properties can be obtained in these auctioned properties and huge legal risk of vacating or owning after encumbrances./ mortgages / litigation which normally ARCs/ Banks/ Auctions hide sometimes purposefully.

When you can buy a fresh properties at a market rate with all proper due diligence in place then why to buy properties from such auctions which offer it on “As it is where it is basis”?



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