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RBI Loan Restructuring Relief for Real Estate

In a major relief to corporate and retail borrowers, the Reserve Bank of India (RBI) allowed banks to go for one-time restructuring of loans that are facing Covid-19 stress, while keeping interest rates unchanged because of prospects of high inflation rates and perilous state of the economy. RBI

BY Realty Plus
Published - Aug 10, 2020 6:06 AM

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In a major relief to corporate and retail borrowers, the Reserve Bank of India (RBI) allowed banks to go for one-time restructuring of loans that are facing Covid-19 stress, while keeping interest rates unchanged because of prospects of high inflation rates and perilous state of the economy. RBI 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. 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. The enhanced finance flow should see developers in need of last mile funding being able to complete their stalled projects. 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 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. The across-the-board loan restructuring scheme will extend to individuals, in addition to airlines, hotels and steel and cement companies hit by the pandemic. The step is being viewed as the central bank’s effort to shoulder the burden of seeing the economy through the worst peacetime crisis in the last 100 years. The loan restructuring scheme comes in the backdrop of the government putting the Insolvency and Bankruptcy Code in cold storage, at least for the time being.

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