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Physical auctions are dead: expect 1 lakh realty e-auctions this year

India's commercial banks are expected to conduct over one lakh e-auctions to sell properties of non-performing assets ( If any borrower fails to re-pay the loan installments continuously over a period of time then that particular account and the asset relating to that account becomes a non-performing asset) during FY13-14 as the ministry of finance has made it mandatory for all banks to move from physical auction to the e-auction route, said NPAsource.com, an online portal focused on resolution of stressed assets.

The portal expects residential, agricultural, commercial and industrial properties to be sold through the e-auction route, with the first two accounting for the largest number of transactions.

 Physical auctions are dead: expect 1 lakh realty e-auctions this year

Reuters

Any interested party from India or even abroad can register themselves under the RBI regulations and participate in an e-auction unlike the physical auction system where the interested parties have to travel to the venue where it is going to take place. Banks may fix the minimum price at which the property will be sold at 20-25 percent lower than the going market rate, which could translate into a bargain buy for bidders. Also, since they are auctioned by banks, the title to these properties would likely be clear.

Says, DK Jain, CMD of Atishya Group, owner of NPAsource.com told Firstpost, "E-auctions offer multiple advantages like lower cost, greater participation, save time and allows better price realization for banks."

While bank auctioned-properties can lure home buyers with a significant discount as against the market rate, it must be remembered that a bank auctions only those properties for which the owner is unable to repay the home loan taken from the bank. In other words, there could be various unpaid dues such as property tax, society maintenance, utility dues that you may have to bear.

Also, if the auction attracts aggressive bids, the price could go up and dilute the cost advantage. So, do a proper inspection to assess the true cost of owning the property.

The banking sector is currently under immense pressure as non-performing assets (NPAs) or bad loans have grown irrepressibly. Already the finance minister has directed banks to pull up their socks and control their skyrocketing non-performing assets. The banks have been told to cut their sticky assets to 1 percent of total advances by March 2014.

The focus of most of the banks now is on recovering these dues as it has started impacting their profitability and margins. As on 31 March 2012, net NPAs of 40 listed banks were Rs 61,558 crore, which rose to Rs 92,398 crore as on December 31, 2012.

To read more about how to prevent a nightmare with bank-auctioned homes, click here.

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Updated Date: Dec 20, 2014 17:56:18 IST