TRENDING - Stressing over a distressed property : The Times of India

Distressed properties tend to fetch higher returns. We tell you how you can make a `distressed purchase', without much stress.

The rising realty prices and unavailability of property at desired locations, have forced the property buyers to search for an alternate buying avenue such as the distressed property market. Rohit Kumar, head of research, DTZ India explains, “There are mainly two types of distressed property sales: 1) properties that are re-possessed by the financing institute due to a default in mortgage payments by the property buyer and in turn being sold to recover the outstanding dues and 2) The property owner is in an urgent need of money due to which the owner is willing to sell the property at a lower price than the prevailing market rate. Distress properties are usually valued 10-50 per cent lower than the market rate depending on the seller's circumstances. The buyers can therefore, get significant cost benefit from such purchases.“ Considering the volume of availability of distressed properties and price movement in this city there is abundant scope and opportunities for buying distressed properties.

GETTING ALL THE INFORMATION

From NPASource.com, Devendra Jain, chairman and managing director, Atishya Group, explains, “The steps to get information about the distressed properties are: Normally, the banksFIs publish the auction dates and property details for the auctions to be conducted for such properties.Ones desiring of participation may take part in that after completing the formalities. Participants are allowed the physical inspection of properties.

In certain cases, direct inquiry with banks FIs, can give an idea of availability of such properties available with them.“

STEPS INVOLVED

Ramesh Nair, COO business and international director, JLL India says, “The steps involved while buying a distressed property are: Under bank auction: Of the possible processes, this is lengthier one, with the bank releasing an advertisement, setting a date for the auction, inviting bids, collating the offers and then finally deciding who to sell the property to. It can be even more cumbersome if the buyer himself wants a loan to purchase the property, either through the same bank or a different bank.

Directly from the actual owner: In this case, the owner and the new buyer would agree on the commercial terms, exchange a token deposit and then complete the bank process to continue with the purchase before signing the agreement and accordingly taking possession. The entire bank process of releasing the property, granting the NOC and acquiring the society NOC, and repaying the bank loan, can take two-three months. The price available here is generally higher than it would be in a bank auction, since the seller will try to recover as much of his initial investment as possible.“

IMPORTANT PRECAUTIONS WHILE BUYING A DISTRESSED PROPERTY: FOCUS ON UNDERSTANDING THE HISTORY OF THE PROPERTY; INQUIRY WITH THE BANK MARKET GOVERNMENT AUTHORITIES, ETC. ABOUT DUES & ENCUMBRANCES; CONSULTATION WITH GENUINE EXPERTS FOR SUCH ACTIVITY; VALUATION OF THE PROPERTY TO EVALUATE THE CORRECT MARKET-VALUE OF THE PROPERTY; NO OBJECTION CERTIFICATE (NOC) FROM THE SOCIETY IN WHICH THE PROPERTY IS LOCATED.