E-auction Of Properties Gathers Pace !!

Electronic auction or e-auction of properties is picking up in the country as buyers and sellers are preferring this route to save brokerage fees, time and effort. Commercial banks in India are expected to sell over a lakh non-performing assets (NPAs) or properties in the financial year 2014 through the e-auction mode, according to NPA source.com, a portal that specialises in resolution of NPAs.

“E-auction is preferred by government organisations and departments. Some private companies are also active on this mode but they prefer the close/open bid process over the e-auction mode”, says Om Ahuja, CEO (Residential Services) at Jones Lang LaSalle India. In recent times, we have seen few private or public listed corporates preferring this route and the growth perspective looks good as buyers don’t have to pay any brokerage for such deals, he adds.

E-auction is a process that provides complete confidentiality in terms of price discovery mechanism. DK Jain, CMD of Atishya Group, owner of NPA

source.com says, “E-auctions offer multiple advantages like lower cost, greater participation, saves time and allows better price realisation for banks. Any interested party from India or abroad can register themselves under the RBI regulations and participate in an e-auction of NPAs unlike the physical auction system where the interested parties have to travel to the venue where it is going to take place. This automatically leads to a significant increase in the number of participants, reduces cost and eliminates or curtails manipulation by small cartelised groups.” NPA source.com had 23,000 plus registered properties worth over Rs 21,000 crore.

The Banking sector in India is currently under immense pressure as NPAs or bad loans are growing drastically. The focus of most of the banks now is on recovering these dues as it has started impacting their profitability and margins. According to NPA source.com, the net NPAs of 40 listed banks which stood at Rs 61,558 crore as on March 2012, surged to Rs 92,398 crore as on December 2012.

With the Finance Ministry making it mandatory for all commercial banks to move from physical auctions to e-auction mode for all NPA cases under the Debt Recovery Tribunal, there will be a spurt in e-auctions in the financial year 2014.
Divestment s by corporate and government institutes are the key drivers in this space. However, the e-auction mode is not easy for a common man to participate and requires good understanding of processes that involves legal complexities.