Purchasing a property through a Debt Recovery Tribunal (DRT) auction can be a great way to get real estate at a lower price. However, it requires careful legal and financial checks to avoid future complications. This guide brings together all key points you need to know before, during, and after the auction.
When a borrower fails to repay a loan, banks can recover dues under the SARFAESI Act, 2002. They can take possession of the secured property and sell it through a public auction. This process can happen via the DRT, and banks are not required to go to a civil court for possession.
While DRT auction purchases can be safe, risks include:
Ongoing court cases that could delay possession.
The bank having only symbolic possession (legal control but not physical occupation).
Hidden liabilities like unpaid taxes or bills.
Review the auction notice for property details, reserve price, EMD amount, and timelines.
Verify title ownership and ensure no disputes.
Check court case status in DRT, High Court, or Supreme Court.
Confirm the bank has actual possession, not just symbolic possession.
Ask for a draft sale certificate to review in advance.
Obtain an Encumbrance Certificate (EC) from the Sub-Registrar to ensure no other mortgages or liens exist.
Check for pending property taxes, utility bills, and housing society dues.
Visit the property on the bank’s inspection date.
Check for:
Structural damage or illegal modifications.
Encroachments or disputes over boundaries.
Deviations from approved building plans.
Neighbourhood infrastructure and access.
Keep EMD payment proof ready (Demand Draft or online transfer).
Carry KYC documents – ID proof, address proof, and PAN card.
Set a maximum bid limit in advance to avoid overbidding.
If you win:
Pay the required deposit immediately (usually 10–25% of bid amount).
Collect the Sale Confirmation Letter from the bank.
Pay the balance within the given time (30–90 days).
Obtain the Sale Certificate and register it in your name.
Get a Possession Letter from the bank confirming handover.
Always involve an experienced property lawyer for verification.
Ask for a No Pending Dues Certificate from the bank.
Avoid bidding if there are unresolved court disputes.
In symbolic possession cases, be ready for potential eviction proceedings.
Not checking for pending litigation.
Ignoring hidden liabilities like tax arrears.
Skipping verification of building approvals and zoning compliance.
Assuming the bank will handle eviction in symbolic possession cases.
Buying a DRT auction property can be rewarding and cost-effective, but only if you do thorough due diligence. Verify legal status, check for liabilities, and work closely with a lawyer to ensure a smooth and secure transaction.