alisha | 21 Sep 2020

Will The Real Estate Benefit From Loan Restructuring Move By RBI?

Will The Real Estate Benefit From Loan Restructuring Move By RBI?

With an intent to help revive the economy in India, the Reserve Bank of India (RBI) had announced a loan restructuring plan at the beginning of August. This move of RBI is aimed at helping the cash-strapped businesses.​ ​ Reserve Bank of India Governor, Shaktikanta Das, said, “We are trying to ensure that such businesses can get some regulatory help via banks on the loans that they have taken. That will help the businesses to revive, jobs will be saved and in turn will help in economic revival".

Among various businesses in the country that have been hit hard with Covid-19, Indian real estate is one of them which is under a lot of stress.

RBI's loan restructuring move for real estate

The first half of 2020 turned out to be a bad performing period for real estate considering a study done across the top seven cities in India. With the Governor of RBI sharing the trend of GDP of India remaining in the negative territory for a majority of FY 2020–2021, the news is seemingly a threat to the real estate sector as it runs based on economic growth or economic stability.

As per the announcement by the Reserve Bank of India, a one-time restructuring term loans will be extended up to 2 years moratorium. This step is expected to provide a solution to the much-in-stress developers and individual borrowers in the real estate's housing segment.​

Assuring no repeating of past mistakes in loan restructuring, the central bank has appointed a five-member committee headed by KV Kamath. To provide some more relief to the real estate sector during the Covid-19 crisis, it has also announced further liquidity infusion of around INR 5000 Crores to the National Housing Bank.

Such help and enhanced finance flow shall enable the real estate developers who need funds to complete their derailed projects.

Real estate welcomes loan restructuring decision of RBI

Take a look at how various real estate bodies and leaders are reacting to the RBI's loan restructuring move for the industry:

CREDAI Chairman, Jaxay Shah, said, "The COVID- 19 resolution framework announcement which aids not just one time restructuring but allows banks and borrowers to come up with a resolution plan to come out of this pandemic together. The move of bringing in K V Kamath to head a committee to advise on the financial parameters needed to be kept/maintained across sectors for borrowers who apply for this resolution recasting loan plan shall help in detailing very sound guidelines to aid the industry growth".

NAREDCO President, Niranjan Hiranandani, said, “A positive step by Reserve Bank of India to pay heed to India Inc’s long pending demand of one-time restructuring of loans without classifying them as NPAs, by setting up an expert committee steered by KV Kamath".​ 

Nahar Group Vice-Chairperson, Manju Yagnik, said, "The additional liquidity support of Rs 5,000 Cr via National Housing Bank will make funding easy for housing finance companies and boost demand".

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