A Non-performing Asset or NPA is an advance or loan that the borrower is unable to pay within the stipulated and extended period of time. This could be voluntary or involuntary.
In the case of voluntary, the borrower is actually capable of repaying, but does not do it intentionally.
In the case of involuntary NPA, the circumstances force the borrower to do that.
Regardless of the reason, the loan does not yield any income to the lender in the form of the principal amount or interest amount. And the loan eventually falls in the category of problematic assets.
When a property becomes non-performing, the owner has to sell it. Buyers look at it as an opportunity because they get a chance to invest in something that otherwise might have been beyond their budget.
It is the reality, but you should never forget that the property is beneficial for the buyer when there are no pending dues from your side.
Being an honest seller, you should never hide any dues when you sell an NPA property.
When does a property go for sell under NPA?
There is a procedure for selling a property under NPA. Before the seizure, the defaulter has to get a notice period of 60 days under the SARFAESI Act, i.e., Security and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
Once it is seized, the bank starts the process of auctioning the same, so that the amount can be recovered. The property valuation and estimation are carried out by a panel of experts.
They consider several factors such as the location and area of the house, and its construction quality. The reserve price is informed to those who are interested in bidding. In case the amount received by the bank is higher than the default loan, then the excess amount is returned to the borrower.
Some points to remember when you sell NPA property
Buyers visit the property before bidding. They also carry out an inspection to reveal crucial details that are significant to them. It is your duty to inform them of the reality.
Depending on the problems associated with your property, banks may offer a discounted rate of 10 to 20 percent to the buyer.
There should not be any unpaid dues. If you are the sole owner, then clear all municipal and tax records. In case the property had multiple owners in the past, then you must obtain the mutation deed.
From the seller’s perspective, you should not have any hidden liabilities or facts associated with the property.