IS THERE A WAY TO BUY CHEAPER PROPERTY IN INDIA?

In this article, let’s talk about foreclosed properties and how you can buy them at a lower price than the market value. But first, let us understand what a foreclosed property is?

When a property is owned by a person who fails to make the EMI payments for a long time, banks seize such properties and put them for sale in auction in order to recover the dues. These properties are called “foreclosed properties''. Banks become the rightful owners of the property post seizure under the Sarfaesi Act where they legally have 100% rights to sell off these properties.

Pros of buying foreclosed properties:

• These properties are auctioned at a 20-25% cheaper price.

• They are legally safe and fall under the SARFAESI Act and DRT Act.

• The transaction takes less than 2-3 months to gain ownership through the entire process.

Cons of buying foreclosed properties:

• There is no guarantee of the property’s quality or damages as banks do not provide any disclosures as to property history/condition issues or provide any repairs.

• You need to provide a heavy amount for a buyout guarantee.

• The process may seem to be tedious and exhausting.

A foreclosing bank's representative can accompany you to the property once you obtain preliminary information about an auction. Your bid value can range from 5-20% of the reserve price, along with your application and KYC (know your customer) documents, must be submitted to the bank to participate in the auction. In the event you win the auction, you may have to make some advance payments and the remainder must be paid within a few weeks. If necessary, you can go with a home loan, but keep in mind that you will need to have a decent amount in your bank account anyway.

What may be the possible concerns?

As a foreclosed property comes into your hands from a financial distressed owner, there may be some issues you encounter in the future such as:

• Unpaid property taxes

• Maintenance charges owed to the society

• Electricity/gas bill dues etc

Although the banks won't recover these, you may be getting a great deal even after paying them.

Precautions you can take before buying a foreclosed property:

• Hire a lawyer to ensure that all the legal papers are checked thoroughly, especially if a large amount is involved.

• You should avoid buying an old property as it will require a lot of renovations.

• In most cases, banks ask earlier owners to vacate the property before auctioning it off. If the property is already rented, the tenants may still be living there, and you will be responsible for evicting them. The process of evicting a long-term tenant can be very difficult, especially when the tenant has lived in the house for a long time. It is best to avoid a house that is already occupied by tenants.

Have you ever purchased a foreclosed property? Let us know your experience in the comments.