Not yet as common in India as it is in developed countries, online property auctions are picking up in India. A few property portals in India have taken up online auctions of distressed properties under the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act. Some banks, too, have been experimenting with property portals to conduct online auctions.
Some countries carry out auctions in India for their residents; some of these are open even for Indians. Recently LFC International Real Estate Brokerage LLC and Dubai Real Estate Regulatory Agency Auction and Brokerage invited bids for an online auction for an entire corporate floor in Burj Khalifa, Dubai, United Arab Emirates. This one was open for Indians.
Contrary to popular belief, an auction raises the sale price of a property, say market observers we spoke to.
How is the process initiated?
The initial part of the process is similar to that in offline auctions. About 30 days before the date of the auction, advertisements are published in one English and one regional daily paper. To participate in it, interested parties need to present their bids in sealed envelopes to the auctioneer/authority along with a certain percentage of reserve price as earnest money deposit. The amount is refundable if one withdraws from the process or does not win the bid.
However, for online auctions, the auctioneer issues a separate bid form to generate bidders’ login address and password.
What happens on the day of auction?
Just like in an offline auction, in online auction, too, the bidding is place live but on a portal. On the given date, at a pre-specified time, bidders can log in to the website with their login addresses and passwords issued to them earlier. All participants can view the bids placed by others and, accordingly, revise their own.
There are various reasons why online auctions have not really taken off in India. First, people are still not savvy enough to participate in online auctions, while Internet penetration in smaller areas still remains a challenge for most.
Second, market analysts say while the bidding process is transparent, there is no way the auctioneer can stop property sharks from entering the bidding process. During the time of bidding property sharks may form a bidding group and not let retail investors enter the pool. The process defeats the purpose of auctioning in the open market.