Real estate auctions have generally been associated with distressed properties, being put up by banks and other financial institutions, to recover their dues from defaulting borrowers. Consequently, real estate auctions have been viewed in a rather negative light, even though they can and often do involve enormous sums of money.
Make way for e-auctions
E-auctions, on the other hand, are auctions conducted online, so as to enable quicker and more profitable property sales with much less fanfare, efforts and costs involved. Until recent times, banks conducted physical auctions of distressed properties, by posting newspaper advertisements and making arrangements for serious potential buyers to assemble at a given venue. However, limited awareness and the massive efforts involved in conducting such mainstream auctions, often failed to result in the expected sales or, for that matter, unmasking the appropriate value of the properties in question.
Even though such properties attracted discounts of 10%-15%, as banks merely wanted to recover their costs and not necessarily earn profits, the stigma associated with distressed property auctions and the secrecy surrounding them, caused most buyers to steer clear of them. E-auctions could change this scenario, as they take place in the virtual world and anyone can make their bid on the residential properties, with a real hope of acquiring them at very favourable prices.
How e-auctions work
Developers tie up with leading real estate portals, to announce the auction dates and timing. Alongside, the developers and concerned portals must provide detailed information and documentation about the properties on auction in the proposal documents, including the title deeds, images and videos of the properties, minimum prices and other legal aspects, as per the rules and regulations. For buyers, it is important to study the bid document carefully, conduct a due diligence to understand all details and explore the option of physically inspecting the property once, before making a final decision.
As there is an entry fee involved, only genuine and serious players participate in e-auctions.
Who benefits from e-auctions – buyers or developers?
It is actually a win-win situation for both parties. To list out the benefits in an e-auction:
- As the auction is conducted online, buyers can participate from anywhere in the country, to purchase properties that strike them as sound investments among the various listed options.
- For the sake of transparency (since trust is a major factor in the success of e-auctions), developers, government institutions and banks provide detailed information without withholding any details.
- E-auctions are a new way of selling real estate. So, one can expect to purchase into brand-new constructions, instead of old properties (which may be disputed or have other hidden legal catches).
- Prices are invariably very attractive, as the operational costs of selling a property physically are reduced manifold while selling them online and developers can offer discounts.
- Participating developers can expand their reach, without investing in physical infrastructure, manpower or other additional costs, for selling their projects.
- A spirited bidding process can earn them handsome returns, as there is no upper limit fixed to the final price of the property.
- As long as the basics of the process are adhered to and all rules and regulations are followed diligently, e-auctions are the easiest and quickest way to conduct business without affecting the routine operations of the builder.
How effective are e-auctions as real estate selling platforms?
While nothing can replace a physical inspection of a property, things are changing rapidly. Going forward, technological advancements will ensure that e-auctions deliver enormous benefits to both, buyers and developers. Buyers have access to the best properties on their cell phones and can view tham, without stepping out of their home. Simultaneously, developers have access to buyers from across the country, at a fraction of a cost that they usually incur for marketing their projects.
While e-auctions certainly faced initial problems, technology has ironed out most wrinkles in the process. A number of developers have already realised the potential of taking the e-auction route to sell their properties and are investing in the process.
The future of e-auctions
With growth and advancement in technology and the internet, the real estate industry can reap multiple benefits.
With 402 million active internet users in India by the end of 2015, the phenomenal growth of ecommerce and adequate infrastructure and system controls now available, the real estate industry has become a veritable goldmine once again. E-auctions have a tremendous future, considering the massive benefits, ease, transparency and efficiency, they bring to the entire process of buying and selling properties.
While it may be early days yet, the early adopters of the e-auction platform, will be the ones to benefit the most. In fact, e-auctions are all set to become the new standard in real estate marketing and will revolutionise the sector in the years to come.
(The writer is CEO – residential services, JLL India)