12,000 flats up for sale on EMI defaults

If you go to Paragon Apna Ghar Society in Andheri’s Lokhandwala complex, you will see a demand notice pasted by the State Bank of India on a ground floor flat. It’s owner, Deepak M, obviously could not pay his EMIs on the housing loan. At Borivli’s Gautam Rushivan project, Shiela P’s door has a similar notice pasted on it. She, too, was probably unavailable when the bank’s agents turned up to serve the notice.

These are just the first stages in a long process that separates home loan borrowers from their homes, leading ultimately to a public auction. In Mumbai and its suburbs, an estimated 12,000-20,000 flats and homes are in the process of being notified, seized and auctioned off as home loan borrowers stop paying their monthly EMIs in a downturn. Dreams of owning a home have gone sour for thousands of families.

Rajesh Govil, 39, who had taken a loan four years ago for an under-construction property in Kalyan (West), a Mumbai satellite town, has no home to call his own anymore. He was unable to service his loan with a large private bank, and had to give up his property when a third legal notice arrived. His property is all set to be auctioned by the bank.

From private sector institutions like ICICI Bank and HDFC to public sector banks such as Bank of Baroda and State Bank, all are seizing one- and two-bedroom flats in Mumbai’s peripheral cities of Kharghar, Navi Mumbai, Kalyan, Dombivli, Nerul, Karjat, and Thane. These are the towns the middle classes flocked to when Mumbai became unaffordable, but the downturn has obviously upset even these dreams.

“In Mumbai, there are some areas like Thane, Goregaon and Mira Road which witnessed a construction boom and there defaults are rising. Also, there are people in the financial services who made a lot of money through bonuses. Now that these bonuses are not there, they can’t afford the loans,” said Pranay Vakil of Knight Frank, a real estate consultancy.

As you read this, property brokers estimate that over Rs 3,000 crore worth of flats in these satellite towns are in various stages preparatory to auction by banks.

But it’s not borrowers alone who are biting their fingernails. Analysts spoken to by DNA say that the downturn has hampered the ability of banks to get rid of these properties and recover their loans. At a time when property sales are just not moving, the addition of seized properties to the real estate inventory in Mumbai and its surrounding areas has not helped matters.

DNA spoke to 10 brokers across the suburbs, and at least four of them agreed that properties coming back to banks had increased drastically. A Kalyan broker said: “The properties coming to auction are four to five years old where the buyer could not service the loan. But there are few takers!”

A senior official from Bank of India says his bank has seen a rise of Rs 70 crore in bad home loans since September, 2008. “Till September, the figure (of bad loans) was merely Rs18 crore, but by February, 2009, it had shot up to around Rs90 crore,” said the official, part of the bank’s special asset recovery cell. The bank is, however, trying to help borrowers avoid defaults by rescheduling loan “in genuine cases”.

A senior official from Federal Bank in Mumbai said: “Sales are not substantial. Auctions are failing as buyers are still waiting for prices to come down and banks are unable to fetch market rates for these properties.”

(Some names have been changed)