E-auction by SBI for properties- Should you invest?

State Bank of India, the biggest lender in India, will be holding its e-auction for properties on the 30th of December, 2020, covering both commercial and residential properties. These are mortgaged properties from defaulters and the bank will be auctioning the same for recovery of dues. While people are hugely attracted to these properties for the chance to buy prime real estate at a comparatively lower price in a location where new supply is almost non-existent and to get a fair discount or better deal on the transaction, pitfalls cannot be avoided. 

Firstly, there is no unified database of auctioned properties that can be referred to while one cannot accurately predict the highest bid price for a property in the auction. This may make it tougher to arrange funds while one cannot be guaranteed of building an asset at a price which is more comfortable as per experts. While the bank may have done its basic legal due diligence, they are not responsible directly for physical issues faced by the property, encumbrances and so on. Post being auctioned, these affairs will have to be covered by the buyer itself. 

Kanika Gupta Shori, COO and Co-Founder at Square Yards, India’s predominant real estate platform, has opined that the bank will only have possession of the property which is of a symbolic nature. Post sale, the buyer may have to tackle possession related aspects in scenarios where the property has been rented out and has not been vacated yet by the tenants. Buyers of properties are usually perceived as investors and cannot also expect relief at consumer courts if they wish to file cases for construction quality lapses and so on. Shori stated that auctioned properties mean that buyers will not be legally qualified as consumers since no actual sale is taking place. They will hence be unable to file cases legally against builders for poor quality of construction and receive compensation from the court likewise. 

Hence, auctioned properties, while coming at a sizable discount and seeming very attractive, should be carefully assessed for risks before buying. You should conduct your due diligence thoroughly before venturing into the e-auction process.