6 September, 2023
Unlock the doors to real estate success
Read time: 5 minutes

In today's edition:

  • In the news: G20, grading, and Airbnb
  • My thoughts on: Bank auctions
  • Q&A: Rental agreements

Handpicked stories from my weekly digest

Here are the 5 stories that you need to be aware of from this past week:

  • G20 Boosts Real Estate: India's hosting of the G20 meetings in 2023 has boosted the country's real estate sector. The event has helped to raise India's profile on the global stage and is likely to have an impact on FDI and property values. Read more
  • Credit to Real Estate Grows: Credit outstanding to the real estate sector in India grew by 38% in July 2023 from a year ago, according to data from the Reserve Bank of India (RBI). This is the highest growth rate in the sector since March 2021. The increase in credit is being driven by a number of factors, including low interest rates, rising demand for housing, and government initiatives to boost the sector. Read more
  • MahaRERA Grades Projects: The Maharashtra Real Estate Regulatory Authority (MahaRERA) has decided to grade real estate projects based on their compliance with the regulatory norms. The grading will be done on a scale of A to D, with A being the highest grade. The move is aimed at improving transparency and accountability in the real estate sector. Read more
  • Congress Shutdown Deadline: The US Congress is facing a deadline of September 30 to avoid a government shutdown. The shutdown would occur if Congress does not pass a funding bill by that date. Republicans and Democrats are deadlocked over funding for President Joe Biden's social spending agenda, which is a major sticking point in the negotiations. Read more
  • Airbnb's de facto ban in NYC: A New York court has upheld a ban on short-term rentals of apartments through Airbnb and other platforms. The ban was put in place in 2016, and it has been challenged by Airbnb and other companies. The court ruled that the ban is legal and that it is necessary to protect tenants' rights and prevent the displacement of residents. Read more

Bargains for the bold?


Image credits: Freepik

An alternative, and somewhat less conventional approach to purchasing a property, is by participating in auctions conducted by banks and financial institutions. You may have noticed such properties advertised in newspapers or on websites. What makes these properties appealing is their initial price, known as the reserve price. However, it's important to understand that the final closing price remains uncertain until the entire auction process is completed, as other bidders can drive up the prices.

Typically, these properties are sold at a discount of around 15% to 20% compared to the market rate, which is a significant draw for potential buyers. Nevertheless, as an individual buyer, it's crucial to familiarise yourself with the entire sale and auctioning process employed by banks and financial institutions when considering such a purchase. Failing to read the fine print in the offer documents can lead to costly consequences, so engaging a legal advisor well-versed in these matters is highly advisable.

It's important to note that banks and financial institutions that auction these properties do not assume responsibility for any other encumbrances associated with the property. These properties are typically sold on an "as-is-where-is" basis. Bidders should also be aware that borrowers have certain rights in a property being auctioned, especially in cases where the auction is a result of loan default or mortgage foreclosure.

How did these assets end up getting auctioned? When a borrower takes out a home loan, the bank retains the right to sell the property to recover their outstanding dues if the borrower defaults on repayments. In such situations, after following the necessary legal procedures, the lender places the property up for auction, establishes a base price, and allows participants to bid higher than the base price. The highest bidder ultimately acquires the property.

Before bidding, it's essential to inspect the physical condition of the property. You should coordinate with the bank to arrange a visit to the property and ensure there are no bank notices on the doors or society notice boards regarding the property you're interested in. Thoroughly assess the condition of the house before participating in the auction.

Participating in an auction: Participating in an auction typically involves some financial commitments. Banks or financial institutions usually require a 10% Earnest Money Deposit (EMD) based on the property's value before the auction. This deposit serves as a safeguard against frivolous bids. If you win the bid, you are then expected to pay a certain portion of the total amount on the same day as your victory. The remaining 75% must be paid according to the terms set by the auction authority, which may vary from case to case.

Failure to meet the specified payment deadlines will result in the loss of the property and forfeiture of the EMD paid to the bank earlier. Therefore, it's essential to be well-prepared and informed before venturing into property auctions conducted by banks and financial institutions.


Why are several rental agreements only for 11 months?
- Jitesh

Hi Jitesh,

A lease agreement with a duration of less than a year is not required to be registered under section 17 of the Registration Act of 1908. This implies that such agreements can be signed without registration. When a lease is less than a year, one can avoid paying stamp duty, saving money in the process.

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Disclaimer: This newsletter is intended for informational purposes only and should not be construed as professional advice. Please conduct your own due diligence prior to making any decisions.

By Ashwinder R. Singh
Step up your real estate game with exclusive access to tribal knowledge accumulated over decades.
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