Real Estate

Real estate sector hails RBI move to ease liquidity pressures

Anil Urs Bengaluru | Updated on April 17, 2020 Published on April 17, 2020

₹10,000 crore for NHB will help housing finance companies, developers


“The RBI’s focus to provide credit flow to NBFCs is a key step. This will provide a boost to various real estate activities, give an initial fillip to the real estate sector,” said Ramesh Nair, CEO & Country Head, JLL.

“The steps taken by the central bank 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.”

As per the latest data by RBI, NBFCs’ outstanding credit to commercial real estate stood at ₹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 much-needed relief to the sector.

Refinance facility to the extent of ₹10,000 crore to National Housing Bank (NHB) is a welcome move to provide the much needed liquidity to housing finance companies.

Positive signals

Anuj Puri, Chairman, Anarock Property Consultants, said “The RBI move will boost liquidity in the market and accelerate the economy and facilitate bank credit flows in Lockdown 2.0. Among the various measures announced, commendably, its allotment of ₹10,000 crore to NHB is a big move for the real estate sector reeling under liquidity crisis. It will help provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in Covid-19 times.”

“Further, the RBI has reduced reverse repo rate by 25 bps — 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,” he added.

Piyush Gupta, Managing Director, Capital Markets, at Colliers International India, said “There has been specific mention of lending to real estate sector by NBFCs, which reflects increased focus of the regulator on this sector. 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. Further, a window of ₹50,000 crore under TLTRO will provide incremental liquidity to NBFCs, MFIs, which could be utilised for onward lending to the real estate sector.”

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said “We are extremely delighted and find a great sense of reassurance with the central bank taking cognizance of specific problems faced by the real estate sector and proactively taking targeted measures to address those issues. The measures taken for liquidity support to NBFCs, HFCs and MFIs will meaningfully help the cause of the sector.”

He added “The move on reduction of reverse repo rate by 25 basis points shall push banks to open up the credit flow to economic activities. Similarly, allowing a 90-day extension for asset classification to loans that have been granted moratorium window is a critical step to assuage credit quality concern of lenders. Considering the lockdown and the impact on migrant labour workforce, there will be an inevitable delay in construction activity in real estate projects. Taking note of the situation, the central bank has provided one-year project completion extension on asset classification for NBFC loans to CRE segment. Considering NBFCs have been very active in this segment, this announcement will ease the pressure of this segment too.”

Published on April 17, 2020

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