Monetary Policy: RBI’s loan restructuring move to provide breather to real estate
Bangalore/ Mumbai: The Reserve Bank of India’s decision to extend a one-time restructuring term loans with up to 2 years moratorium is expected to provide a breather to stressed real estate developers and individual borrowers in the housing segment alike.
The one-time restructuring of loans without classifying them as non-performing assets (NPAs) will be based on the recommendation of the expert committee steered by KV Kamath, said the central bank.
“While the sector was looking at a further revision in the policy rate, to boost demand, we appreciate the accommodative stance by the RBI, in the wake of a high rate of inflation which may have necessitated keeping policy rates unchanged,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
The central bank has also announced further liquidity infusion to the tune of Rs 5000 Crores to National Housing Board (NHB) which should be able to provide some relief during these times of crisis.
“Opening up the window for restructuring of loans to companies, individuals and MSME under mandated safeguards grants breather to the liquidity strapped industry. A flexible repayment scheme under the new resolution framework shall bring in the much-needed relief to resume operations smoothly,” said Niranjan Hiranandani President – Assocham and Naredco.
The enhanced finance flow should see developers in need of last mile funding being able to complete their stalled projects.
“It will help infuse capital into the HFCs and eventually provide relief to developers battling liquidity issues in COVID-19 times,” said Anuj Puri, Chairman – ANAROCK Property Consultants
The RBI governor revealed that real GDP of India will trend in the negative territory for majority of FY 20 – 21, which causes concern for the real estate sector as economic growth and stability is a key ingredient for its long-term growth.
“The real estate sector too is yet to see the full swing impact of measures announced earlier. One-time restructuring of loan would have given the much needed respite to the real estate sector which has been facing headwinds due to the pandemic,” said Ramesh Nair, CEO and Country Head (India), JLL.
The real estate sector saw a decline in the first half of 2020 in residential sales across the top seven cities while launches remained constrained on the back of bleak economic environment and muted consumer sentiment. According to Knight Frank, Launches were down 46% to 60,489 units compared to the same period, year earlier, while sales tanked 54% to 59,538 units.
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