RBI’s measures will provide major relief to developers: Experts

In a major move to boost liquidity in the market, the RBI announced several additional measures to accelerate the economy and facilitate bank credit flows even as the Centre has extended the nationwide lockdown to stop the spread of coronavirus.

Among the various measures announced, notably its allotment of Rs 10,000 crore to National Housing Bank is a big move for the real estate sector, which is 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, according to Anuj Puri, Chairman Anarock Property Consultants.

Further, RBI has reduced the reverse repo rates by 25 bps, and it now stands at 3.75 per cent. 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.

In another major relief to developers, the RBI has further extended the date of commencement of commercial operations of project loans for commercial real estate projects, which are delayed for reasons beyond the control of promoters.

This move 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.

Targeted liquidity infusion

Vijay Mani, Partner, Deloitte India said that the key takeaway is that liquidity infusion measures are now more targeted – banks and NBFCs are being encouraged to provide credit to small and medium businesses through these additional measures. That’s a good move. It’s also encouraging that the RBI has said that this a beginning and they will keep watching if more needs to be done.

Measures have been announced on asset classification but understandably, it’s a delicate balancing act; while the moratorium has been made effective from March 1, banks have also been asked to make 10 per cent provisions in the next two quarters, and they have been asked to not announce dividend for FY20.

This balancing act will need to be regularly revisited in the coming weeks and months and incremental steps may be needed as the situation evolves.

Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE, said RBI’s liquidity measures are a clear step towards encouraging liquidity in the banking system, preserving financial stability and supporting overall economic growth.

He said: "In the wake of the evolving Covid-19 situation, the announcement in the reverse repo rate cut from 4 per cent to 3.75 per cent should further push banks to lend to the productive sectors of the economy. In addition to this, RBI has also announced that loans given by NBFCs to real estate companies to get similar benefit as given by scheduled commercial banks."

Announcement of refinancing facility for leading financial institutions such as NABARD and SIDBI, relaxation of stressed asset classification and resolution norms and provision of another window of Targeted Long Term Repo Operations worth Rs 50,000 crore will provide additional fiscal stimulus to the economy.

To further ease flow of funds to the housing sector, the National Housing Bank (NHB) has also been provided with a refinance facility of Rs.10,000 crore for Housing Finance Companies (HFCs) as additional liquidity for individual housing loans, which is a much needed boost at this time, he said.

COMMENT NOW