The e-auction by State Bank of India of Vijay Mallya’s Kingfisher House, the headquarters of the defunct Kingfisher Airlines, turned out to be a damp squib with no bidders. However, e-auctions are not easy and require days of planning. Buyers too need to do their due-diligence before participating in such bids and not be lured by the temptation to strike bargains.
Located near the domestic airport at Mumbai’s Vile Parle area, Kingfisher House is spread across a built- up area of over 17,000 sq ft. The base price of the multi-storey property was set at Rs 150 crore and it was being auctioned by SBICAPS Trustee, a subsidiary of SBI Caps conducted on the e-auction property platform by AuctionTiger.
Prospective buyers will now be able to bid for the commercial property till April 4. The actual auction will be held on April 6, reports said.
But is the valuation of Rs 150 crore property correct? According to Sanjay Dutt, managing director, India, Cushman & Wakefield, the price is fair but the first attempt at auctioning was not successful because there was no sufficient information available about the property. Nor was it marketed well. The fact is that it is a unique property and has retail and signage potential. Automobile companies, banks, airlines and hotel companies can consider it as it is a standalone property in the area. It also offers scope for further construction.
SBI had initiated the auction to recover Rs 7,000 crore owed by Mallya – declared wilful defaulter – to a consortium of 17 banks. The auction on Thrusday, March 17, was conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. As per the public notice for e-auction, Kingfisher House also comes with an outstanding property tax of Rs 67 lakh which is yet to be paid. While this was an e-auction for a commercial property, banks also e-auction residential properties from time to time. People bidding for such properties should ensure they do not get stuck with unclear legal titles.
When do banks e-auction properties? If the borrower fails to honour a loan, banks start the legal process and repossess the property and later sell it through e-auctions. Usually if the borrower defaults on his loan for six continuous months, he is given a 60-day notice period. Banks can then issue another 30-day notice period and in case the money’s still not repaid the loan is declared part of the bank’s non-performing asset (NPA).
These properties are auctioned to recover losses under the Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002).
These properties are valued by a professional valuer before the auction. The valuation is generally conservative as banks only try to recover the amount that is outstanding. Empanelled valuers keep the construction, location and the area in mind before valuing the property. The plausible value given by them helps set the reserve price which is disclosed to the bidder beforehand. In this case it was Rs 150 crore.
5 checks that buyers should carry out
1 Don’t be taken in by the low price of the property. Check for pending dues or litigations. These could include unpaid electricity bills and society dues
2 Try and visit the property before bidding for it. Check from neighbours, societies etc if there are any cases of subletting that may not be known to the bank. Sub-tenancy can create its own share of problems.
3 Check if the property has a clear title otherwise banks may not give you a loan. It will also not allow you to resell the property
4 Verify all municipal records, tax records and check if it had a sole owner and if the property can be transferred to you
5 Compare the reserve price of the property with other properties in the area where it’s located to arrive at an independent assessment of its market value.