Does the property sell at a better sale price under different sales mechanisms, bidding versus negotiated sales?
Empirical studies from Australia and the United States between 2000 and 2020 have shown that properties sold through bidding often achieve higher sale prices than those sold through private negotiations. This trend is particularly evident for homogeneous properties, such as apartments, which tend to secure higher price premiums through bidding compared to heterogeneous properties like detached houses. Additionally, bidding in buoyant markets, especially for high-end and foreclosed properties, has been associated with increased price premiums.
In the Indian context, property bidding is primarily conducted by financial institutions and regulatory bodies to recover dues from defaulters. For instance, the Securities and Exchange Board of India (SEBI) has scheduled bidding events for properties belonging to defaulting companies to recoup funds for investors. These bids are typically for distressed assets, and properties are often sold below market value to expedite recovery.
The concept of bidding for non-distressed properties is not widely prevalent in India. However, there have been initiatives to introduce this practice. Auction House India, for example, has collaborated with UK partners to facilitate property bidding, aiming to provide a transparent and efficient platform for buying and selling real estate. Despite these efforts, private treaty sales remain the dominant method for property transactions in the country.
The Indian real estate market is poised for growth, with projections indicating a moderate single-digit price increase in 2025. This anticipated appreciation is attributed to factors such as urban migration, economic growth, and policy reforms aimed at boosting the housing sector.
Given the evolving market conditions, there is potential for bidding to become a more prominent method of property sales in India. Bidding can offer benefits such as attracting serious buyers, ensuring transparent transactions, and potentially achieving competitive prices. However, for bidding to gain wider acceptance, there needs to be increased awareness among market participants about its advantages, along with the establishment of robust legal frameworks and bidding platforms
In conclusion, while bidding has been shown to yield higher sale prices in markets like Australia and the U.S., its application in India has been limited mainly to distressed asset recovery. As the Indian real estate market continues to mature, incorporating bidding as a mainstream sales strategy could offer an alternative avenue for property transactions, potentially benefiting both sellers and buyers
NOTE:The information presented in this document is based on research and market conditions available at the time of writing. Real estate trends, policies, and economic conditions are subject to change, and readers are encouraged to verify the latest data before making any financial or investment decisions
