Everything you need to know about Earnest Money Deposit (EMD).
When you decide to participate in a bank auction, the first financial commitment you make is the Earnest Money Deposit, universally known as EEMD or simply EMD. Standing for 'Earnest Money Deposit', this amount serves as a security deposit to demonstrate your serious intent to buy the property. Without submitting the EMD, you cannot participate in the bidding process.
How is EMD Calculated?
Typically, the EMD is set at 10% of the Reserve Price of the property. For instance, if a property's reserve price is ₹50 Lakhs, the EMD would be ₹5 Lakhs. This amount must be deposited via Demand Draft (DD) or NEFT/RTGS to the bank's designated account before the auction date.
Is EMD Refundable?
Yes, absolutely. If you participate in the auction but do not win (i.e., someone else outbids you), the entire EMD amount is refunded to your bank account without any interest. This process usually takes anywhere from 2 to 7 working days, depending on the bank's internal processing speed.
Forfeiture of EMD
However, there is a catch. If you win the bid (you are declared the H1 bidder) and then fail to pay the remaining amount (usually 25% of the bid amount within 24 hours), your EMD will be forfeited. This is a strict rule enforced to prevent non-serious bidders from disrupting the auction process. Therefore, ensure your finances are in order before you bid.
Key Takeaways
- Calculate 10% of the Reserve Price for your budget.
- Ensure you have the funds ready in your account for the transfer.
- Double-check the beneficiary account details mentioned in the auction notice.
- Remember that backing out after winning costs you the entire deposit.