Property developers get a leg up as RBI lists steps helping liquidity

Central bank provides Rs 10,000 crore as refinancing to National Housing Bank (NHB) to support housing finance companies.

Non-banking finance companies (NBFC), banks and housing finance companies (HFC) will get help after the Reserve Bank of India (RBI) announced on Friday a second round of measures to help liquidity as the country battles the coronavirus, said real estate firms and consultants.

The central bank, besides cutting the reverse repo rate, said it is conducting a targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore. To avail funds, banks have to invest in the bonds and debentures of NBFCs among others.

It provided Rs 10,000 crore refinancing to National Housing Bank (NHB) to support housing finance companies.

“NBFCs and HFCs account for over 60 per cent of developers’ loans. With today’s announcement developers can expect more funds from NBFCs and HFCs,” said Niranjan Hiranandani, managing director at Hiranandani group.

Anuj Puri, chairman of Anarock Property Consultants said: “Allotment to NHB 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.” 

The central bank, in a measure helping borrowers said the 90-day non-performing asset (NPA) norm would exclude moratorium period, meaning there would an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020.

Kamal Khetan, chairman and managing director of Sunteck Realty, said the relaxation of asset classification norms will ease the stress on NBFC lending to the real estate sector besides ensuring stable costs of funds and avoiding distress sale of assets by developers.

The central bank said the date for commencement for commercial operations (DCCO) in respect of loans to commercial real estate projects delayed for reasons beyond the control of promoters can be extended by an additional one year, over and above the one-year extension permitted in normal course, without treating the same as restructuring.” It has now been decided to extend a similar treatment to loans given by NBFCs to commercial banks,” it said.

“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,” Puri of Anarock said.

Khetan of Sunteck Realty said: “In the current time where market sentiments need to improve, the announced measures will help the organized and established developers to gain maximum mileage and drive sales in the upcoming time.”