Yet, for the discerning and patient homebuyer, even amid sky-rocketing values, there is still hope.
It is possible to buy a 3BHK home at the cost of a 2BHK—by tapping into bank auction properties.
Demand dynamics also play a role. Larger units typically attract fewer buyers due to higher ticket sizes, while 2BHK units see stronger demand and, consequently, higher pricing. This imbalance creates pricing gaps that savvy buyers can exploit.
What is it?
An auction property, also known as a foreclosure or distressed property, is real estate seized by a lender after a borrower defaults on loan repayments. The lender then sells the property, often at a discount, to recover the outstanding loan amount.
These properties are sold through public auctions or online e-auctions after borrowers default on their mortgages. Buyers bid above a pre-set reserve price—often below the prevailing market value, but take on the responsibility of clearing any outstanding dues.
Legal framework
Under India’s SARFAESI Act, when a borrower fails to repay home loan equated monthly instalments (EMIs), the lender takes possession of the mortgaged property. The borrower is given a fair opportunity to clear pending dues.
If the borrower fails to do so, the bank lists the property for sale—usually online—at a base price designed to recover the loan and accrued interest. This base price is often lower than the market rate, creating an opportunity for buyers.
Interested homebuyers can register on e-auction portals and place bids. The highest bidder wins and must complete the required formalities, after which the bank transfers the property to the buyer’s name.
Finding deals
How to find: Check bank websites and property portals that list distressed or foreclosed properties in your city or preferred location.
Price estimation: It is advisable to independently assess the property’s market value. Properties in developing zones or city outskirts often offer better deals, especially for larger units.
Property details: Download brochures, layouts and floor plans to evaluate the size, configuration and overall value of the property.
Due diligence: This is the most critical step. Verify property titles, outstanding dues such as property tax or society charges, and legal compliance under SARFAESI. Visit the property in person to check for unreported damage, neighbourhood issues or disputes, as auction properties are sold on an ‘as-is-where-is’ basis.
Most importantly, read and fully understand the auction rules and conditions before bidding.
From funding to possession
Buyers should arrange financing well in advance and ideally secure a pre-approved loan before entering the auction, as payment timelines after winning a bid are tight. It is equally important to determine a maximum bid amount upfront and ensure it stays comfortably below prevailing market prices.
To participate, buyers must register on auction portals and deposit a refundable earnest money deposit (EMD), typically around 10% of the reserve price. Bidding should be firm but disciplined, with strict adherence to the pre-decided price ceiling.
Once an auction is won, the full bid amount must be paid within the stipulated timeline, usually 15 to 30 days. Buyers must also deduct 1% tax deducted at source (TDS) for properties valued above ₹50 lakh and deposit it against the seller’s PAN.
The final step involves completing property registration and taking physical possession. Engaging a professional property lawyer is strongly recommended to verify title ownership and ensure all legal documentation is in order.
Risks involved
While buying undervalued property can be lucrative, bank auctions are rarely smooth or straightforward.
There are often investors with deep pockets acting in collusion to suppress prices. Resistance from previous owners and procedural delays are also common.
Emotional discipline is essential. Even if the property fits your dream-home criteria, stick to the maximum price you decided before entering the auction. In overheated bidding scenarios, avoid getting carried away and overpaying.
Buyers should also factor in the cost of time, effort and unforeseen complications.
That said, for those willing to put in the hard work and navigate the process carefully, the savings can be substantial—often around ₹50 lakh on a ₹2 crore property.
Happy hunting.
Raj Khosla is the founder and managing director of MyMoneyMantra.com.
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