Buying an auctioned property? Here is everything you need to know

While you purchase a property with dwelling mortgage, the financial institution reserves the proper to promote the property to get well their dues in case you don’t repay the mortgage on time. In such a state of affairs, after reminders and due course of, the lender places the property in query up for public sale, following which it fixes a base value after which individuals collaborating within the public sale are allowed to put bids which are greater than the bottom value. The particular person bidding the best will get the property.

These properties are priced nearly 15-20% cheaper than their unique market value and most properties bought in auctions are often ready-to-move-in properties. 


There are a number of circumstances which can result in public sale of the property equivalent to  mortgage default, tax default, chapter, execution of courtroom decree, Seizures and Confiscations, regulatory violation, authorities surplus (authorities properties that are now not required for public use), and many others.  However is it a good suggestion to purchase such a property? We decode

What’s an auctioned property 

Banks often public sale the properties underneath the provisions of and the process prescribed underneath the SARFAESI Act and the foundations made thereunder. Below these provisions  a property is auctioned when the borrower, who has mortgaged its properties to the financial institution, fails to pay again to the financial institution. 

Why is it auctioned? 

Normally a financial institution public sale course of is initiated when borrower defaults on three consecutive House Mortgage EMI’s. A discover is served to the shopper to reply inside 60 days that why the financial institution shouldn’t provoke a public sale of property attributable to default in fee. Borrower pays the installments and this discover is withdrawn.

In any other case a borrowe has the proper to submit his objection inside 60 days with justification for non-payment of EMI. In case, no reply is acquired from borrower or financial institution is just not glad with the reply then financial institution can provoke financial institution public sale course of. After the expiry of this 60 days, the financial institution can public sale the property after 30 days.

 The best way to discover such properties

Many banks publish lists of their auctioned properties on their web sites or in newspapers. You too can contact the financial institution on to inquire about any properties which are at present being auctioned. The IBAPI portal by the Indian Banks Affiliation (IBA) to record financial institution public sale properties will also be checked. 

“Web sites like,,, MSTC (Steel Scrap Commerce Company) e-auction platform, and many others., record properties being auctioned by numerous authorities departments and organizations. Aside from authorities web sites, public sector banks and monetary establishments usually public sale off properties attributable to mortgage defaults. You possibly can verify the respective financial institution web sites for public sale notices,” mentioned Himanshu Sachdeva, Senior Affiliate, TAS Regulation.

A number of actual property public sale web site and on-line labeled web site additionally promote properties accessible for public sale, nonetheless, bidders are strictly suggested to conduct correct due diligence earlier than bidding in properties listed on such web sites.

Examine the Bodily Situation of the Property

To examine the property’s bodily situation, you need to discuss to the financial institution and get a date mounted to go to the property. When doing that, you have to confirm that there are not any financial institution notices pasted on the doorways of the property or the society noticeboard anymore concerning the property you’re contemplating. Test the situation of the home completely earlier than bidding for it. 


The best way to bid?

You will need to first determine the property and the financial institution that’s finishing up the public sale. “Typically all particulars are talked about within the notification of the public sale together with the method. Public sale dates are talked about by every financial institution on their respective web sites and the identical can be revealed within the newspapers,” mentioned Adhil Shetty of BankBazaar.

The best way to register

Registration at MSTC portal -> Authorization of paperwork from MSTC -> Connect properties -> Pay Pre-Bid EMD required in opposition to property -> Take part in public sale (bidding) -> Bid reject/settle for by financial institution -> choice e-mail to H1 bidder. At current there isn’t any registration price.


” With the intention to bid a young type alongwith earnest cash deposit (DD/banker’s cheque) must be submitted earlier than the tender deadline. It can be crucial that whereas submitting the tender type, detailed KYC doc is also submitted as non submission of KYC doc could result in rejection of tender type,” mentioned Sadhav Mishra, Accomplice, SNG & Companions, Advocates & Solicitors.


Earnest Cash Deposit

The financial institution typically cost 10% of the property’s worth as Earnest Cash Deposit (EMD) earlier than the public sale. “This serves as a safeguard and eliminates beginner bids. Thereafter, if the particular person wins the bid then they’re imagined to pay 15% of the quantity similar day of profitable and relaxation 75% fee is required to be made as per the phrases of public sale authority, which can differ from case to case,” mentioned Sachdeva.

 In case you are unable to pay the mentioned quantity inside the stipulated time you’ll lose the property together with the EMD quantity paid to the financial institution earlier. 

What’s the pre-payment and taxation angle?

“Cost plan of auctioned properties can differ relying on auctioning authority, the kind of property, and the particular phrases and circumstances of the public sale which can embody Earnest Cash Deposit (EMD), full upfront fee, partial upfront fee and remaining inside stipulated time interval, installment plan, Escrow account, and many others. You will need to rigorously learn and determine the fee plan related to auctioned property, failing which the funds made by the bidder could get forfeited and property could get re-auctioned available in the market,” mentioned Sachdeva.

 GST, stamp obligation & registration, TDS (the place worth of property is above 50 Lakh), Property Tax, and many others can be relevant whereas buying the auctioned property.

” Patrons at financial institution public sale are required to pay a TDS of 1% of the entire property worth on the time of fee. The deduction is barely accessible if the property is value not less than Rs 50 lakh,” mentioned Ravi Prakash, Head, Authorized, Hero Realty.

Pending dues 

Purchaser can be accountable for paying any unpaid charges related to the Financial institution’s Public sale property. These contributions embody municipal taxes, society fees, statutory dues, electrical energy payments, and extra.

How to make sure there are not any pending dues

In case you are contemplating shopping for a financial institution public sale property, it is very important do your due diligence and to pay attention to the dangers concerned. 

“The bidder ought to ask for all of the related property paperwork which incorporates sale deed, title paperwork, property tax receipts, electrical energy, water and different utility payments, and many others. The bidder shall additionally conduct a correct title search from involved authority/registry, earlier than bidding on immovable property, earlier than bidding. Aside from conducting due diligence, now it’s also needed to acquire NoC from native authority (L&DO if property is located in Delhi). Aside from conducting title search, it’s also necessary for bidder to verify that there no different pending mortgage/mortgage or authorized case pending in opposition to the property,” mentioned Sachdeva.

“The client can even rent a professional legal professional with expertise in property issues to overview the paperwork and ensure there are not any hidden points,” mentioned Prakash.

What paperwork ought to a bidder ask for?

– Ankur Mahindro, Managing Accomplice, Kred Jure – Advocates & Authorized Consultants lists down the nexxesary guidelines after profitable the bid 

1. Verifying the antecedent title deeds and checking the unique paperwork with the financial institution like mortgage settlement and/or mortgage deed;

2 Whether or not the financial institution is in lawful possession of the property being auctioned

3 Whether or not there may be any litigation regarding the property;

4 Whether or not there are any previous dues of any society or authorities authority equivalent to property taxes, and many others;

5 If the proprietor of the property is an organization, then verify with ROC if some other monetary institute has cost/ mortgage over the property;

6 Test within the workplace of the Sub-Registrar of Assurances to make sure if there are any hostile title claims; 

7 If the property is in a society, the NOC of the society on the market of the property. If the property is a land, then income information needs to be seen to determine whether or not the identify of the proprietor is mutated therein as proprietor.

Following are just a few related paperwork a bidder could ask earlier than bidding in any property:

i. Title Deed and Possession Paperwork which incorporates sale or conveyance deed, earlier title doc to determine possession historical past, and many others

ii. Property Tax and Utility Payments

iii. Encumbrance Certificates

iv. Accredited Constructing Plan and Format Plan

v. NOC from Native Authorities

vi. Completion and Occupation Certificates

vii. Public sale Catalog supplied by the auctioning authority, which ought to embody phrases, circumstances, and any obligations of the customer.

viii. Public sale Invitation or Discover

ix. Property Inspection Report

x. Images and Video

What if there are structural modifications to property that have not been accredited?

If there are structural modifications to a property that have not been accredited by the related native authority, it may result in authorized and regulatory points. Nonetheless, the bidder ought to assess the character and extent of the unapproved structural modifications.”

“Decide if these modifications are vital, have an effect on the property’s security, or violate native laws. If the structural change doesn’t violate any native regulation, then the bidder shouldn’t be involved about such change, nonetheless, the bidder nonetheless can use such unapproved structural change to additional negotiate with the vendor/public sale authority. Additional, in circumstances the place such modifications are violating any native regulation then there are probabilities that native authorities could present course of for regularizing unapproved modifications by paying fines, acquiring retroactive permits, and guaranteeing that the modifications meet present constructing codes,” mentioned Sachedeva.


“It’s best to seek the advice of a lawyer or structural engineer to grasp your rights and obligations on this state of affairs. Typically the properties that are accredited by the banks for loans are the properties that are legally accredited and certain have much less probabilities of having approval associated points. It is strongly recommended to get these clarifications from the financial institution itself,” mentioned Shetty. 

The Safety Curiosity (Enforcement) Guidelines, 2002 place a accountability on the financial institution to ship the property to the customer free from encumbrances upon receiving fee.

How lengthy will it take for financial institution to present possession of property to one who has received the bid?

In circumstances of public sale of distressed property, the courts in a number of judgments have noticed that banks ought to guarantee that after profitable the public sale bid, the bidder shall get the peaceable possession of property inside 6 months from public sale, topic to the fee phrases agreed between the bidder and financial institution.

In case if the public sale authority fails to ship the possession of property inside stipulated time interval (typically six months), the particular person have proper to get a refund of the bid quantity deposited with the Financial institution together with curiosity and damages.

“You might get the possession instantly after the completion of the sale and registration of the property in your identify. Nonetheless, it could differ relying on the property, location, closing fee from the customer and authorized procedures concerned,” mentioned Shetty.

Symboliic vs bodily possesion

Patrons should know that there are two kinds of possessions. One is symbolic possession and second is bodily possession. 

Bodily possession means the financial institution already has direct bodily possession of the property. 

Symbolic possession means the financial institution is within the technique of acquiring bodily possession from the borrower.

What are the dangers related to buy of auctioned properties ?

Title: Patrons should full a title verify and confirm possession of the property.

“There’s an inherent threat of title whereas buying in public sale because the financial institution transfers the title on as is the place is foundation so within the occasion of any pending litigation on the property or any dues or any lacuna in title, the identical shall go onto the purchaser,” mentioned Sadhav Mishra, Accomplice, SNG & Companions, Advocates & Solicitors.

Pre-Public sale Deposits: When shopping for property at a financial institution public sale, the customer should deposit 10-15% of the entire property worth as a deposit earlier than the public sale and in the event that they win the public sale and do not pay the stability, in addition they lose their deposit.


Rights of the borrower: Courts have hooked up prime significance to the proper of the Borrower to reclaim its title of the property/ a possibility to the Borrower, earlier than sale of auctioned property is executed.

“The bidder shall at all times understand that debtors do have sure rights in a property that’s being auctioned, particularly when the property is being auctioned attributable to mortgage default or mortgage foreclosures. As an illustration borrower have proper to take part within the public sale, the borrower even have ‘Right of redemption’ i.e. to treatment the default by paying the excellent dues, together with the mortgage quantity, curiosity, penalties, and some other related prices, earlier than the public sale takes place, which can end in nullifying the entire public sale course of. Additional, the borrower at all times have authorized cures specifically in circumstances the place the foreclosures course of was performed improperly and which will end in prolonging the public sale course of,” mentioned Sachedva.


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