How to buy property in an auction

BL ;17 Oct 2013

Tight timelines in the auction process necessitate deep pockets.

Do you yearn to buy a house in the city but find realty rates prohibitive? You could try bidding for properties being auctioned by banks. The laws allow banks to recover dues from defaulting borrowers by auctioning the properties they pledged.

Banks may fix the reserve price (minimum price at which the property will be sold) for such properties 20-25 per cent lower than the going market rate. This could translate into a bargain buy for bidders. Also, since they are auctioned by banks, the title to these properties would likely be clear.

DEEP POCKETS NEEDED

The auction process, however, has tight timelines within which the buyer needs to arrange the money to close the deal. So, this requires that you have deep pockets. Banks issue a public notice in newspapers about the proposed auction and invite bids.

The notice includes the details of the property, date, time and venue of the auction, reserve price, and earnest money deposit.

It also mentions the date on which interested parties can inspect the property before submitting their bids. Bidders must submit their applications to the bank quoting their bid amount which should not be less than the reserve price. Along with this, they must pay earnest money deposit which may be around 10 per cent of the reserve price.

The auction usually takes place after 30 days from the date of the public notice. In this period, the borrower may still pay the money due to the bank.

If the borrower settles the dues, the auction will not happen and your earnest money deposit will be returned. If the auction takes place and you do not win the bid, your earnest money deposit is returned. If you win the bid, you will have to pay around 25 per cent of the bid price (less the earnest money deposit) on the day of the auction. You need to pay the balance amount within the next 15 days or an extended period agreed between you and the bank.

If you win the bid but do not pay the required amount within the specified periods, you will lose the money paid earlier. So, walk this path only if you have got the funds ready to go the whole way. Banks may offer loans to acquire such properties. But given the tight timelines, you will have to make arrangements for a loan before the auction date.

ONLINE OR OFFLINE?

Buying property through the auction route involves effort. You will need to scan newspapers for announcements by banks regarding such auctions, do the necessary due diligence, and organise the funds quickly. Else, you can contact real estate agents who may have this information. Also, Web sites such as www.foreclosureindia.com provide online listings of properties which banks advertise to auction.

In a normal (offline) property auction, bidders gather at the auction venue where their bids are considered. Banks may also allow competitive bidding among the bidders for improving their offers.

In online property auctions, the process is largely similar, but bidders place and revise their bids on a Web site. The online auction method has not yet been much successful in India. Observers attribute this to fears of online fraud, risk of manipulation by cartels, and lack of awareness among bidders.

WHAT TO WATCH OUT FOR

Despite the benefits, acquiring property through the auction route may not be everyone’s cup of tea. If the auction attracts aggressive bids, the price could go up and dilute the cost advantage. So, it is important that you make an assessment of the market value and bid prudently to get a good deal. Also, to be on the safer side, it is better to check the property documents before deciding to bid, or engage a lawyer to verify the title.

This apart, keep in mind that banks auction property on an ‘as-is-where is’, ‘as-is what-is’ basis.

This means that expenses on any repairs, renovation, unpaid property taxes, electricity dues and statutory liabilities will have to be borne by the buyer. The buyer also has to bear other expenses such as stamp duty and registration fees. So, do a proper inspection to assess the true cost of owning the property.

Besides, some people consider auctioned property unlucky, and have misgivings about buying something the owner does not willingly sell. This could be a reason why such properties may be priced at a discount to market rates.

காசோலை மோசடிக்கு அபராதம்: சுப்ரீம் கோர்ட் புதிய நிபந்தனை

தினமலர் :அக்டோபர் 17,2013,01:58 IST

புதுடில்லி: காசோலை மோசடி தொடர்பான வழக்கில், காசோலையில் குறிப்பிடப்பட்ட தொகைக்கு, இரு மடங்கை அதிகரிக்காத வகையில் அபராதம் விதிக்க வேண்டும்' என கோர்ட்டுகளுக்கு, சுப்ரீம் கோர்ட் அறிவுரை வழங்கியுள்ளது.

கோல்கட்டாவில், சோம்நாத் சர்கார் என்பவர், 69,500 ரூபாய்க்கு காசோலை வழங்கினார். அதை வாங்கியவர், வங்கியில் செலுத்திய போது, சோம்நாத் சர்கார் கணக்கில் பணம் இல்லாததால், காசோலை திரும்பி வந்தது. 

இதையடுத்து, பாதிக்கப்பட்ட நபர், உள்ளூர் கோர்ட்டில் வழக்கு தொடர்ந்தார். இதில், கோர்ட் சோம்நாத் சர்காருக்கு, ஆறு மாதம் சிறை தண்டனை விதித்து, பாதிக்கப்பட்டவருக்கு, இழப்பீடாக, 80 ஆயிரம் ரூபாய் வழங்க உத்தரவிட்டது. 

இதை எதிர்த்து, சோம்நாத், கோல்கட்டா ஐகோர்ட்டில் அப்பீல் மனு செய்தார். இதை விசாரித்த ஐகோர்ட், சிறை தண்டனையை ரத்து செய்து, 80 ஆயிரம் இழப்பீடுடன், 69,500 ரூபாயையும் அளிக்கும்படி உத்தரவிட்டது. "ஐகோர்ட் குறிப்பிட்ட தொகையை தன்னால் வழங்க முடியாத நிலையில் உள்ளேன். கருணை காட்ட வேண்டும்' என, சர்கார், சுப்ரீம் கோர்ட்டில் மனு செய்தார். 

இதை விசாரித்த நீதிபதிகள், டி.எஸ்.தாக்குர் மற்றும் விக்ரம்ஜித் சென் பிறப்பித்த உத்தரவில் கூறியதாவது: காசோலையில் உள்ள தொகையின் இரு மடங்கிற்கு மிகாமல் அபராதம் இருக்க வேண்டும்.

 இதற்கெனவுள்ள கட்டாய வரம்பை மீறாத வகையில் அபராதம் விதிக்க வேண்டும்.எனவே ஐகோர்ட் பிறப்பித்த உத்தரவை ரத்து செய்து, கூடுதலாக, 69,500 ரூபாய்க்கு பதில், 20 ஆயிரம் ரூபாயாக குறைக்கப்படுகிறது. இவ்வாறு, நீதிபதிகள் தங்கள் உத்தரவில் கூறினர்.

Bounced Cheques :

Story first published on:  NDTV :October 16, 2013 20:13 (IST)

New Delhi: Courts cannot impose a fine of more than twice the amount in bounced cheques, the SupremeCourt has held, stressing that the limit is inviolable and should be respected.

"First and foremost is the fact that the power to levy fine is circumscribed under the statute to twice the cheque amount.

"Even in a case where the court may be taking a lenient view in favour of the accused by not sending him to prison, it cannot impose a fine more than twice the cheque amount. That statutory limit is inviolable and must be respected," a bench of justices T S Thakur and Vikramajit Sen said.

It set aside the Calcutta High Court order which had directed a person to pay Rs. 1,49,500 against the cheque amount of Rs. 69,500.

In this case a trial court had sentenced a person to six months imprisonment and directed him to pay compensation amounting to Rs.80,000 in a cheque bounce case.

The accused, Somnath Sarkar, then approached the High Court which directed him to pay an additional Rs. 69,500 to the complainant and his jail term was waived.

Mr Sarkar then moved a mercy plea before the Supreme Court saying that he was not capable of paying the amount.

The court after hearing his plea set aside the High Court order and reduced the amount of Rs. 69,500 to Rs. 20,000.

"The High Court has, in the case at hand, obviously overlooked the statutory limitation on its power to levy a fine," the bench said.
Posted by Bank Finance India at 3:55 PM 

Curbing bad loans top priority: Bhattacharya

HT Correspondent, Hindustan Times  Mumbai, October 08, 2013

The newly appointed chairperson of the country’s largest lender State Bank of India (SBI), Arundhati Bhattacharya, on Tuesday said that keeping bad loans under control would be her top priority.

“There is no doubt in our mind that NPAs (non-performing assets) remain the top priority. It will remain a top priority...(as long as) we see the stress being around,” said Bhattacharya at her maiden interaction with the media.

The gross non-performing assets of SBI rose to 5.56%, among the highest in the system in the June quarter.

The 57-year-old Bhattacharya, who on Monday was appointed  the first woman head of the 207-year-old bank, said SBI will use a lot more of IT tools to bring the NPA numbers down. She said the bank will soon be launching an IT platform in this regard.

Bhattacharya said the top government lender has under- utilised the IT architecture when it comes to dealing with NPAs, and it will leverage on the benefits of the same to get a grip over stressed assets. “We will be using IT much more. I think we have not leveraged it fully enough,” she said.

Bhattacharya, however, said she does not possess any “magic wand” to solve the problem in the next quarter or two, stating the bank is a proxy to the turbulent economy and hence, the stress will continue. But, she said there is no alarm rising on the NPA front as the economy has shown signs of improvement.

NPA watch: Banks to strictly monitor loans

Mahua Venkatesh, Hindustan Times  New Delhi, October 08, 2013

With the surge in the level of bad assets in the Indian banking system, all loan accounts that have been restructured under the CDR (corporate debt restructuring) scheme are being closely monitored by the top managements of the lenders.

Loans worth `75,000 crore in 2012-13 were restructured under the CDR scheme, which is about double of what was done in the previous financial year. However, the government has asked banks to be cautious and closely monitor these accounts as there is fear that a chunk of this could turn unproductive with the slowdown in the economy.

Besides, all existing loans of `1 crore and above and their performance are also being closely scrutinised by the lenders.

  “Due to the slowdown, there have been several cases where banks have gone in for restructuring but those cases are being very closely monitored to ensure that there are no damages to the system as there can be some who take advantage of the economic situation,” a bank chairman, who did not wish to be identified, said.

The finance ministry and the RBI have asked banks to get tough with wilful defaulters. Banks have also decided to ask promoters of companies seeking corporate debt restructuring for a list of personal assets, which will be charged to banks to ensure that banks have sufficient collateral to cover their bad loans.

“This issue ...has been discussed with senior finance ministry and banks  and all steps would be taken to address it,” the source said.

Pyramid Saimira: Sebi orders attachment of promoter’s bank accounts

After acquiring special powers from the government recently to attach properties
 and assets of defaulters in the capital market, this is Sebi’s first major move. 

Anirudh Laskar  Mint Fri, Oct 11 2013. 11 06 PM IST

The market regulator ordered the attachment in order to recover an amount of Rs1.27 cr

Mumbai: The Securities and Exchange Board of India, or Sebi, on Friday ordered the attachment of bank accounts of P.S. Saminathan, promoter of Pyramid Saimira Theatre Ltd, in order to recover an amount of Rs1.275 crore.

After acquiring special powers from the government recently to attach properties and assets of defaulters in the capital market, this is Sebi’s first major move.

 In December 2010, the market regulator had barred Saminathan from accessing the securities market for 10 years and directed him to launch a public offer for de-listing of his company.

Sebi had found Saminathan guilty of inflating profit and revenue by making fictitious entries, false corporate announcements and making preferential issue of share warrants to promoters without receiving any money in return

Make contracts simple to help customers, RBI official tells banks

BL :Mumbai, Oct. 4:2013

Simpler contracts will put an end to the many hidden penalties and fees in complex loans, according to Deepali Pant Joshi, Executive Director, Reserve Bank of India.

This will make everyone aware of what (loan contract) they are signing.

Banks need to apply principles of transparency to enable easier decision-making by clients, and verify assumptions about what clients understand and don’t understand about their products and the fine print in the contracts they sign.

“If you’ve ever applied for a credit card, a student loan, or a housing loan, you know the feeling of signing your name to pages of barely understandable fine print.

“What often happens as a result is that many people are caught by hidden fees and penalties, or saddled with loans they can’t afford,” said Joshi in her keynote address at the College of Agricultural Banking, Pune.

They are also hit with a massive rate increase on their credit card balances even though they have paid bills on time.

“Students who take student loans should have clear and concise information about their obligations.

“Ordinary investors — like you and me, seniors saving for retirement — should be able to receive and understand information about the costs and risks of mutual funds and other investment products so that they can make better financial decisions as to what will work for them,” said Joshi.

Information imbalance

Banks need to address the needs of the customer and customise products and services without adopting a one-size-fits-all approach, she added.

The RBI official observed that the greatest threat arises from the asymmetries information and power between financial institutions and poor consumers.

This imbalance widens as customers are often less experienced and the products they choose are more sophisticated.

This means, there is a real potential for negative outcomes arising out of institutional abuses or ill-informed client decisions.

Financial education is an important tool to address this imbalance and help consumers, she said. .