WHY BUYING A HOUSE IN A BANK AUCTION MAY BE A TIGHTROPE WALK

Buying a house requires quite a bit of legal dexterity with relation to paperwork, and more so when it comes to a property on auction. The prize on the other end of the tightrope could be alluring, but you will need to tread cautiously, as the valley below could be ridden with jagged rocks of possession problems lender-borrower disputes, and loan issues

- Amit Sethi

Ever thought of buying a property being auctioned by banks? From time to time, banks put out auction notices for properties that turn into non-performing assets (NPAs) due to non-payment of loans. These properties are usually ready-to-move-in and are typically available at a discount to the current market rates.

Though that might sound attractive, yet there seem to be few takers for these properties. In 2022-23, scheduled commercial banks (SCBs) recovered ₹ 30,864 crore out of ₹ 1.11 lakh crore of NPAs through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) recovery channel. This is one of the channels, besides lok adalat, debt recovery tribunal (DRT) and insolvency and bankruptcy code (IBC) from where NPAs are recovered. The recovery in 2022-23 was 27.6 per cent compared to 22.5 per cent in the previous financial year, shows the latest data.

So why is the recovery rate poor and why are there few takers for such properties? That’s because the benefits of auction bidding are often overshadowed by the risks and uncertainty involved in the auction process. That’s why, it’s important to know the pain points should you decide to buy an auctioned property.

Lender-Borrower Dispute

One of the issues you may face is the intervention of the borrower whose property is put on auction due to non-payment of dues.