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The Reserve Bank of India’s Annual Policy Statement for 2008-09 has brought some cheer for infrastructure and real estate companies.

Infrastructure companies seeking finance from banks are required to spell out the date of completion of the project at the time of financial closure. If the actual commencement of commercial production or ‘usage’ extends beyond one year from the date of completion, the account was to be classified as a sub-standard one. This has now been enhanced to two years from the date of completion. Infrastructure projects are often subject to unpredictable delays, due to various legal and procedural hurdles, delaying revenue flows. The relaxation in this period given now, would not only allow a longer 2-year window on such delays, but may also encourage banks to increase lending to the sector.

The housing sector has also received a boost as the RBI has enhanced the limit for housing loans that enjoy a reduced risk weight of 50 per cent (in the bank’s books), from Rs 20 lakh to Rs 30 lakh. In other words, loans up to Rs 30 lakh can now be taken at lower borrowing costs. Borrowing costs would remain expensive for high value loans (above Rs 30 lakh) as the risk weight for that category remains higher.

The move is positive at a time when the real estate sector is reeling under a slowdown, what with end users reluctant to buy homes and interest rates showing no signs of softening. Real estate companies with projects catering to middle and lower income group may see some improvement in demand for their projects as end users can now borrow at better rates.

More Stories on : Stocks | Real Estate & Construction | Housing Finance

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