Post Unlock, Price Drop?

Have Auction Properties become more attractive investments since the lockdown?

The lockdown enforced due to the pandemic has disrupted almost all spheres of life and economy. The world markets, including India’s, are struggling to catch up to the pre-lockdown economic levels. And from here, it is simply anyone’s guess as to how much more time will be required for things to go back to normal. However, as of now, the country is in the unlock phase and investor confidence is gradually re-building. So, what does it mean for you when it comes to considering investing in auction markets? Is this the right time or would you be better off holding off investing for another day in the future?

Over the last few months, we at FindAuction.in have received several queries on this subject. Over the last six to seven months we have tracked the fluctuations in the auctions market and learnt a few things about the impact of the lockdown on its prices. And we are happy to share them with you here in easy to understand observations

• Serious delinquency rates in housing loans and credit cards inched up by 13 basis points (bps) and 10 bps, respectively, on a year-on-year (y-o-y) basis in the quarter ended September. Serious delinquencies shot up 52 bps y-o-y in loans against property (LAP), a category which has seen a steady decline in asset quality over the last few years.

• What this means is that more people have begun to default on loans since the lockdown against the same period, last year. These properties are now under the banks custody and are already up for auction or will soon enough be put up for auction.

• State Bank of India will conduct an electronic auction for the mortgage properties — both the commercial and residential properties — on September 30. Under SBI mega e-auction, you have a chance to bid and win some home, plot or shop at a lower price than the existing market rate. "It's time to bid on your dream property! Register for SBI Mega E-Auction," India's largest lender poster on its social media platform. More than 1,000 properties will be up for the sale, according to reports.

• Recently, SBI announced a mega e-auction for properties across India at the end of September 2020. It was one of the biggest e-auction with over 1000 mortgage properties across housing, plots, commercial and industrial spaces.

• Also alongside, sometime in mid-September, the home loan interest rates reduced to as much as 6.7 per cent. This has also made it lucrative for those first-time home-buyers to look at purchasing flats from the open market. But the thing to keep in mind is that, with economic uncertainty affecting jobs and businesses, reduction in interest rates may not really induce purchase.

Now that we have a few data and market behaviour indicators to give us a start, we can try to arrive at a logical conclusion for the value proposition offered by auction markets. The prices on auction properties are always maintained at rock-bottom. Banks always want to liquidate the assets as soon as possible to mobilise its other investment assets in the financial markets. So what has changed over the last few months is the number of properties that have come under auctioning from banks.

It is just the tip of the iceberg, as we see it from here and there will be many more properties that may get added to our list sooner or later. As an investor, what you need to keep in mind is whether you have the stamina to invest in an under-valued property for the long-term. Clearly, the housing market does not look very promising for quick returns at least for now but the real estate market has remained subdued for almost over a decade. This suggests that sooner than later, the conditions are bound to improve and the investments you make today should start giving the desired payoffs in the near future.

So, if you have the pockets for it and are looking at investing through auctions, this would be an ideal time for you to take the plunge.

If you still have any queries or need our support, please get in touch with us at hello@findauciton.in and we’ll get back to you at the earliest.