Real Estate Sector Upbeat With RBI Measures
In a major move to boost liquidity in the market, the RBI today announced several additional measures to accelerate the economy and facilitate bank credit flows in Lockdown 2.0. Among the various measures announced, commendably its allotment of INR 10,000 crore to National Housing Bank is a big move for the real estate sector reeling under the liquidity crisis. "It will help provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in COVID-19 times," says Anuj Puri, Chairman – ANAROCK Property Consultants.
Further, RBI has reduced the reverse repo rates by 25 bps – it now stands at 3.75%. This is another big step as the rate cut will definitely send out positive signals in the current times, and will enable banks to lend even more.
Also, in another major relief to developers, the RBI has further extended the date of commencement of commercial operations (DCCO) of project loans for commercial real estate projects which are delayed for reasons beyond the control of promoters. This is indeed a big move and will bring much-needed relief to cash-starved developers. It will help in easing out time for maintaining and managing cash flows for these developers.
Piyush Gupta, Managing Director, Capital Markets at Colliers International India says, “There have been specific mention of lending to Real Estate Sector by NBFCs which reflects the increased focus of the regulator on this sector." As per the announcement, developers now have additional one year to repay lenders which is over and above one year available so this will help management of cash flows and reduce asset classification stress of Real Estate focused NBFCs, Gupta adds. "Further, a window of Rs. 50,000 cr. under TLTRO will provide incremental liquidity to NBFCs, MFIs which could be utilised for onward lending to the real estate sector,” he says.
Industry Reacts
Ramesh Nair, CEO and Country Head, JLL India said the steps undertaken by the RBI to ease the liquidity concern of Banks, NBFCs and other financial intermediaries is an “acknowledgement of the liquidity issues faced by the financial system of the country as well as the industry”.
“Today’s announcement will give an initial fillip to the real estate sector. The Central Bank’s focus to provide credit flow to NBFCs is a key step. This will provide a boost to various real estate activities,” said Nair.
As per the latest data by RBI, NBFCs outstanding credit to the commercial real estate stood at Rs 1,29,359 crore as of end September 2019. “The relaxation of NPA classification norms and extension of one year for commencement of projects to real estate developers by NBFCs will provide the much-needed relief to the sector. The refinance facility to the extent of Rs 10,000 crore to NHB is a welcome move to provide the much-needed liquidity to Housing Finance Companies,” Nair added.
Farshid Coopers, MD, Spenta Corporation said: “the Real estate Industry which has been cash strapped for more than a year now can expect a breather as loans given by the NBFCs for will not be classified as NPA even on non-repayment for a period of 1 year.”
Hakim Lakdawala, Group Promoter, Goodwill Developers said: “Allowing NBFCs, who have given loans to real estate companies to get similar benefits as given by the scheduled commercial banks, at a challenging time like this is an encouraging sign.” “With few construction activities looking to re-start post 20th April, we are hopeful that the situation normalizes and India moves to a path of recovery,” he added.
Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and PropTiger.com said: “This move by the RBI will hopefully nudge banks to increase lending to various sectors of the economy, which is the need of the hour.”
Prateek Mittal, Executive Director, Sushma Group said, “The reduction in reverse repo rate by 25 basis points and infusion of Rs 50,000 crore in NBFCs as announced by apex bank is indeed a welcome move.”
Raman Gupta, Director- Branding and Construction, GBP Group said in today’s scenario “maintaining liquidity in the system becomes the key and today's RBI announcements are a step in the same direction”. “Hopefully, banks will also participate in the endeavour,” Gupta said.
Pradeep Aggarwal, Founder & Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM said: “This time the RBI has addressed the realty sector too, which is a clear indication that the government understands the importance of the second largest employer in India. All the economic machinery has to work together to make sure the country comes out of this conundrum as soon as possible.”
Ankit Kansal, MD &CEO, 360 Realtors said, “The decision to allow NBFC to extend realty loans by a year under certain circumstances will give some relief to the sector. Interestingly, the inflation rates have declined and are expected to remain within 4 per cent in the first half of 2020. This will offer ample policy manoeuvring bandwidth to the Central Bank”.
Uddhav Poddar, MD, Bhumika Group said, “RBI has provided liquidity to NBFC’s which mainly service the mid and small businesses and to the real estate sector. Real estate is a capital intensive business and needs liquidity infusion and we hope this and more steps from the RBI will prompt banks and NBFC’s to provide the required liquidity in the sector ".
