Page 53 - Banking Finance October 2020

FEATURES

Three things to

ask before you

buy a house in a

bank auction

T he country’s largest bank, the State Bank of India What are the risks?

(SBI), is e-auctioning at least 1,000 residential
Often people assume that properties that banks auction will
properties, belonging to borrowers who
have clear titles. But the auction notice, typically, has a
defaulted on their loans, starting 30 September
clause. It states that to the best of the bank’s knowledge
through October. The properties to be auctioned include
and information, no encumbrances exist on the property
open plots, residential, industrial, and commercial units
and the bank won’t be responsible for any unknown existing
across the country.
and future encumbrances or any third-party claims, rights
or dues.
Bank property auctions, typically, generate huge interest as
such units are often priced lower than the existing market
Banks use legal terms “as is where is" and “whatever there
rates. But don’t let the lower prices lure you into a deal that
is" when auctioning properties. These terms mean that the
you won’t like later.
bank is selling the property based on its current physical and
“Purchasing such properties do make sense, but bidders legal conditions, including any encumbrances.
should be aware that such opportunities are not as
straightforward as normal property purchases. First, they In other words, the responsibility of dealing with any
need to be clued in on when and where they take place. problems that arise later lies with the buyer once the
Second, there is usually legal due diligence they need to do. property is auctioned.
They should decide if they have enough bandwidth for it," said
Anuj Puri, chairman, ANAROCK Property Consultants Pvt. Ltd. According to property consultants, there have been cases
where buyers discovered that the property was disputed,
While not all properties may come with problems, it is or the original borrower had got a court order against the
important to do your due diligence before buying and read bank auction. “In some cases, lenders only take symbolic
the terms and conditions. The answers to these three possession of a property, which means they take over the
questions can help you decide whether the deal is really property on paper as per its legal rights, and not its physical
worth the trouble. possession. The owner could be staying in it," said Ajay

BANKING FINANCE | OCTOBER | 2020 | 53