If a person buys a house on a loan and is unable to sustain the equated monthly instalments (EMIs) after a few months, the lending institution is within its rights to sell the property and recover the loan amount. However, it can do so only after obtaining the borrower’s consent.
How it happens
Before the lending institution sells the property, it issues a legal notice to the borrower. This notice says that the property will be sold through a bidding process in order to recover the loan amount.
Typically, the borrower gets 60 days to settle his dues. If the buyer is not able to pay even within the period, the lending institution sends a final possession notice. Lending institutions are empowered by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, to recover their non-performing assets without the intervention of the court.
What can the borrower do
The borrower needs to vacate the property before the bank or lending institution can go ahead with the sale process. However, if you do not want to do so and can manage to repay a part of your dues, you can challenge the bank by filing an appeal before the Debts Recovery Appellate Tribunal (DRAT). You need to deposit 50% of the pending amount with DRAT before you file the appeal. The property cannot be sold till the time the case remains sub judice.
We suggest that if such a situation arises where you are unable to pay the EMIs due to an emergency, the first step is to make a realistic assessment whether you would be able to continue with the loan in the future. If you think, there’s no way out, it is better to sell the house on your own and settle the bank’s dues before the recovery agent approaches you.
Window for prospective buyers
The lending institution gets a notification of auction published in local dailies. Since banks are in a hurry to recover their dues, you may get a profitable deal compared with market rates. However, before making any such buying decision, look at the condition of the house, the infrastructure and amenities around it and whether it suits your needs.
— Devesh Chandra Srivastava