Page 54 - Banking Finance October 2020

FEATURES

Sharma, managing director, valuation services, Colliers Such dues could end up neutralizing the benefit of lower
International India, a realty consultant. prices. Some of these charges also attract interest penalty
if they are not paid on time. Besides, you may also need to
He added that there have been a few instances where a spend extra on repairs and maintenance of the property.
property was auctioned under the Supreme Court’s
guidance, but the registration office was unable to effect If the house is a part of a society, you can check if there are
the transfer to the new owner as the property was in a any pending dues. In some cases, bank officials help you with
dispute. “Banks are supposed to mention that it’s a buyer- the details of pending charges when you go to inspect the
beware sale. This means that banks know that the property property. But not all such details may be available.
has encumbrances and the buyer will need to take risk.
There have been judgments against the financial institutions If you don’t get a loan from the bank auctioning the
where they have not conveyed the current property status property, other institutions will not lend for a foreclosed
to the buyer," said Sharma. asset. “Bidders, therefore, need to have enough cash or
they would need to arrange money through other means.
Ensure that you do the due diligence before participating in
the bidding. Banks issue notification of e-auctions well in If you don’t get a home loan, there won’t be any deductions
advance with details of the properties. available on income tax for repayment. Factor such costs
before bidding," said Sharad Agrawal, executive director,
SBI, for example, has given the addresses and sizes of the capital markets, Knight Frank India, a consultant firm.
properties, names and addresses of previous owners, and
other details on its website. It has also allowed interested Can you pay on time?
customers to inspect the properties by seeking an
Before participating in the auction, banks usually ask for 10%
appointment with bank officials, whose contact details have
of the reserve price as earnest or deposit money.
been given.
The money is reimbursed if you lose the bid. For winners,
But don’t make the mistake of relying only on the information the payment deadlines are tight. According to SBI’s terms
provided by the institution. In case someone claims to be the and conditions, the winner will need to deposit 25% of the
owner of the property after the purchase, it is unlikely that sale price, after adjusting for the earnest money, by the next
the bank or institution will come to your rescue. working day of winning an auction. The balance 75% is to
be paid within 15 days of winning the auction. If you fail to
So make independent enquiries regarding the meet any of the deadlines or give up the flat, you will forfeit
encumbrances, the title of the property, and the claims and the deposit.
the rights of the previous owner or any other entity. While
the ownership rights conveyed to the bidders are absolute Since home loans, typically, take a bit of time or are difficult
and enforceable, issues about title, possession and other to materialize in such cases, you will need to arrange
encumbrances could still arise. adequate money within the bank deadlines.

Is it really cheap? Banks stick to a strict payment structure as they are in a
The terms and conditions for the properties that SBI is hurry to recover the loan amount, and want only serious
auctioning convey the risks that buyers need to be aware buyers to participate.
of. Besides selling the property on “as is where is basis", the
bank has also stated that the payment of all statutory and If you are bidding for an auctioned property, remember that
non-statutory dues, taxes, charges, fees and so on will be there are few legal remedies available to opt out or
the sole responsibility of the bidder. So if the previous owner surrender the property back to the bank, unless the bank
has not paid dues on the property, the winning bidder will has not clearly mentioned encumbrances known to it.
need to clear them. (Source: Livemint)

54 | 2020 | OCTOBER | BANKING FINANCE