The online world is a bargain hunter's best friend, with discounts and deals available for a wide range of products, be it electronics, holidays, apparel or pieces of art.The latest addition being real estate auctions by banks, at a rate cheaper than the market.
When borrowers fail to repay loans, banks auction the property to recover dues. These auctions take place under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
Banks and financial institutions have tied up with online real estate sites such as indiaproperties.com and Arms, the retail debt recovery arm of asset reconstruction company Arcil.
Over the past year, both have collectively auctioned almost 1,500 properties across India, the majority being residential.
Bidding process
The initial part of the process is similar to offline auctions. Thirty days prior to the date of the auction, advertisements are published in at least one English and one regional daily.
Additionally, auctioneers contact brokers in the catchment area of the auctions to spread the word.
To participate, interested parties must give their bids in a sealed envelope to the auctioneer, along with a certain percentage of reserve price as earnest money deposit.
The amount is refundable if one withdraws from the process or does not win the bid.
For online auctions, they must also give a separate bid form, requesting a log-in address and password.
"These are different from an offline auction in the way they are conducted," says Amit Shah, VP (auctions), indiaproperties.com.
On the given date, at a pre-specified
time, bidders must log in to the website with the address and password issued to them.
The bidding takes place live. All participants can view the bids placed by others and, accordingly, revise their own.
However, you must remember that you are responsible for any disruption due to internet connectivity at your end.
Watch out
Sanjay Agarwal, senior vice-president and group head (retail strategy and branding), Arcil, says: "The biggest advantage of an online auction is transparency. Buyers know the number of participants and can see all the bids."
Ideally, such transparency should take care of the possibility of dummy bids being placed to raise the price of the property.
Besides, with participants being spread out geographically, chances of them colluding to swing the outcome their way and put any single participant at a disadvantage are lower.
In any case, there is no way of proving such a malpractice, as the auctioneers are upfront about the fact that the auction's authenticity cannot be questioned.
Typically, auctioned properties are 10-20 per cent cheaper than the market prices. And, that is the maximum discount you can expect, irrespective of the platform - online or offline.
However, both Shah and Agarwal say buyers opting for an online auction do it for convenience rather than saving on money.
Online auctions give one a chance to bid for properties across India. But, there is a caveat. Buyers need to have their representatives in the city where the property is being auctioned.
Considering these properties are sold on an as-is basis, having someone to check for pending dues or litigation before bidding for a property would be a good idea.
