India’s biggest lender, State Bank of India, has once again announced e-auction of properties. The e-auction will happen on 5 March and will include residential, commercial as well as land parcels. E-auction generally gathers interest from buyers as it is perceived that the property will be available at cheaper rates. Apart from this, it is also expected that as it is a bank auction, it may be free from legal impediments. However, experts believe that a person needs to do due diligence on his part. Let's understand a few points to keep in mind.
Right price: Although it is a general perception that the properties available in the auction are cheaper, experts say it may not be the case always. “The reserve price in case of an e-auction is generally the circle rate. The bidding starts on this price. However, it is possible to get the property at a price lower than the market rate," said Bhavin Gada, partner, Stratage Law Partners, a Mumbai-based law firm. Before going for bidding, it will be good to do one’s own research about the market price of the property to check if you are not paying a higher premium for it. The e-auction process is transparent. “The bank does know your customer (KYC) of the bidders and the other bidders know the count of bidders and the price they are bidding," said Gada.
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Physical condition: The information related to the property is available in public domain. Therefore, it will be better to do the physical verification of the property before you bid for it.
“The bank may have further leveraged the property or may have used it to provide accommodation to the officials, therefore, it will be good to do the physical verification of the property to understand its physical state," said Gada.
Clear title: The acquirer of a property through an e-auction should be wary about the title of the property. It is important to check that the title flow of the property is clear. “While prima facie it would be presumed that the properties being auctioned would be free of all legal impediments, considering that properties could be embroiled in various disputes, which may not be easily decipherable through a general check is always a worry. For instance, if a property is entangled in a family or inheritance dispute, there are tenancy or title or acquisition disputes, tax claims, etc.," said Vaibhav Gaggar, managing partner, Gaggar and Associates, a Delhi-based law firm.
“Unfortunately, the authorities put up the property for e-auction on an ‘as is where is basis’ and clearly state that the intending buyer has to conduct his own due diligence and assessment of legal impediments if any. Since there is no central nodal point for conducting due diligence of any property, let alone in a digitized manner, it’s almost impossible for anyone to conduct a 100% thorough due diligence. Having said that, a thorough due diligence can atleast lead to a significant risk mitigation, even if not a complete risk waiver. That process must be adopted before placing a bid," he added.
Therefore, it is important that you do the due diligence on your own before bidding for the property. Take the help of a solicitor, if you are not able to do it on your own.
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