Financially sound non-banking finance companies (NBFCs) and housing finance companies (HFCs) may be next in line to be permitted extension of the date of commencement of commercial operations (DCCO) of project loans for commercial real estate by another one year without downgrading the asset classification.
Official sources said that the Reserve Bank of India (RBI) extended this facility to banks after the recently concluded meeting of the Monetary Policy Committee on February 6 and NBFCs and HFCs may now be included in the scheme to allow completion of a larger number of viable real estate projects that are delayed for reasons beyond the control of promoters.
The move will not only bring NBFCs and HFCs at par with banks in treatment of loans given for restructuring of real estate projects without downgrading the asset classification, but also provide a big relief to both commercial real estate and residential projects that were delayed on account of regulatory issues.
It may be offered to companies such as LIC Housing Finance, PNB Housing and Shriram Finance which have largely remained unaffected from the present liquidity crisis in the sector following problems in IL&FS and DHFL.
As per RBI, commercial real estate (CRE) refers to all the real estate asset classes such as the construction of commercial buildings, IT buildings and even residential structures for which banks have lent loans to developers.
According to brokerage firm Emkay, the proposed extension of DCCOs to NBFCs and HFCs will only have limited impact on the sector, as very few projects of existing NBFCs/HFCs opted for the earlier one-year extension given by the RBI.
However, this can have a positive impact on NBFC/HFC stock prices that have been under some pressure off late.
The expected extension of the facility to NBFCs and HFCs may not be an unlikely move from RBI as even the previous circular on the same changes had been first made available to the banks and was later extended to NBFCs/HFCs.
Banks and NBFCs/HFCs already have one-year extension window available (based on the circular in 2015) for all CREs; however, the recent announcement after the MPC meeting provides an additional one-year window to banks, which is currently not available for NBFCs/HFCs.