Investment in real estate has always been an attractive opportunity and becomes really interesting when it is at a rapidly growing place such as Delhi. Despite having numerous options for investment in real estate, some of the very popular options are to buy auction properties and get into Real Estate Investment Trusts. Both types carry their own set of advantages and disadvantages, which this really helps to decide on.
Learn how to invest in auction properties in Delhi and the role of REITs in the real estate investment landscape is explored as part of this article.
1. Detail About Delhi Auction Properties
1.1 What Are Auction Properties?
These properties come under auctions held when banks or financial houses find that they cannot recover mortgage or loan amounts from the primary sellers and are sold to third parties at public auctions, where because of being priced lower than the prevailing market value, these act as a golden opportunity for the investors.
1.2 Advantages of Buying Auction Properties
In Delhi, buying auction properties therefore offers several benefits for value-seeking investors. The most prominent of these are as follows:
- Discounted Prices: Certainly, the most significant characteristic of auction properties is that they tend to be sold below-market prices. As a direct result of this, there is an opportunity for cost savings.
- Potential for High Returns: There may be great returns when properties are bought below the market value and sold or let out for a much higher amount.
- Faster Acquisition Process: An auction process is more direct and quick compared to a traditional property buying and selling process.
1.3 Auction Property Purchase Challenges
Buying the auctioned properties involves considerable risks and hurdles:
- Property Condition: Probably, the property buyers are not given an opportunity to inspect the property before auction, which may involve costly surprises on repairing.
- Legal issues: The majority of them may have pending lawsuits attached, and so all these properties may be tricky to deal with.
- Cash Funds: No financing facilities are generally available for auctioned properties, therefore one will need to be cash ready for these purchases.
1.4 How to Buy Auction Properties in Delhi
To buy auction properties, you should,
- Study Auctions: Search on bank and government websites for declared auctions
- Inspect the Property: You can inspect the property condition if possible
- Check Legal Status: You could take your lawyer’s help to ensure that there are no disputes or dues against the property.
- Bid at the Auction: Get registered and pay a deposit to bid
- Payment at Time of Winning: Satisfy your payment within the time offered after you win the auction.
2. REITs in real estate investment
2.1 What are REITs?
What is REIT? Real estate investment trusts, or REITs in short, are any companies which are involved in the ownership, operation, or financing of real estate. If the investors do not want to deal directly with or finance properties they can realize returns from real estate investments by purchasing shares in a REIT.
2.2 REIT Classification
There are three primary classifications of REITs:
- Equity REITs Owning and operating properties
- Mortgage REITs Financing properties through investments in mortgage loans
- Hybrid REITs A mix of both equity and mortgage REITs
2.3 Why Invest in REITs?
REITs have proved popular among investors due to the following factors:
- Liquidity: Since they are listed on the stock exchanges, REITs are pretty liquid to buy and sell
- Diversification: REITs own several properties, thus spreading the risk.
- Recurring Income: REITs have the obligation to distribute at least 90% of taxable income as dividends.
- Lower Investment Threshold: REITs are accessible to those who intend to start small.
2.4 Challenges of Investing in REITs
Despite all the above advantages, REITs have certain disadvantages also:
- Market Volatility: Being a part of the stock market, REITs are prone to a case of price volatility.
- Interest Rate Sensitivity: The upward movement in the interest rate will pull the REIT returns downward.
- Fees: The administrative and management fees will decrease the overall profit.
3. Auction Properties vs. REITs
Comparing the auction properties and REITs, the following should be taken into account.
- Initial capital: For the setting up of auction property is very huge compared to REITs, which can begin with a relatively smaller amount of money.
- Risk: Auctions are of high-risk, associated with legal matters or property conditions. However, REITs are characterised by moderate level of risk as they go through the fluctuations of the market.
- Liquidity: The properties sold at auctions are not liquid in nature as due to which the resale takes a lot of time. However, REITs are easy to trade.
- Returns: The returns from the auction properties can be very high with the sale at market value. On the other hand, REITs provide regular dividends along with the appreciation of price.
- Management: For the auction properties, you will require hands-on management. REITs, however, are professionally managed.
- Diversification: Through the auction properties, you tie up your investment in one asset, whereas REITs diversify across the different sectors of real estate.
4. Which Investment is Suitable for You?
4.1 Auction Properties
Auction properties in Delhi are appropriate for:
- Those who have enough capital to invest without financing
- Those who are not apprehensive about the management of properties, as well as issues associated with legal matters
- Those who want high returns but are more prone to risk apprehension
4.2 REITs
REITs may suit
- Those who would prefer a passive investment and like professionals to manage their assets on their behalf.
- Requires liquidity of investments.
- Diversify their portfolio of real estate investments by introducing smaller transactions.
Conclusion
Opportunities through auction properties and REITs are presented to investors depending on the money to invest, the risk they are willing to take, and the involvement they would like. Auction properties in Delhi provide an opportunity for high returns, but they are very risky and demanding. REITs provide liquidity, steady income, and professional management, including a diversified portfolio with no hassle of direct ownership of properties.
You can choose any route you want as investing in real estate can be a highly rewarding activity. You can take the first step by knowing your goals, proper research, and choosing the right type of investment to successfully capitalise on the vibrant Delhi real estate market.
