Earlier this year a friend bought a 96 running a diesel engine (original) with iron man suspension for 14.75 lakhs. So according to that the price tag seems a bit high for a converted car.
As for the engine, you need to get it thoroughly checked out. Make sure it is performing well. Make sure the new engine is updated on the books. And please to confirm if it seems underpowered or not (it does to me, but you should check it first hand)