In a major relief to the struggling real estate sector, the Reserve Bank of India has decided to extend the restructuring of project loans by a year. While this will help stuck projects, it will not do much in terms of creating demand.

Loans for projects that have been delayed for reasons beyond the control of their promoters have been extended by another one year without downgrading the asset classification. This aligns with the treatment accorded to other project loans for the non-infrastructure sector.

"This is a big move and will bring much-needed relief to the cash-starved real estate sector - and to both developers and the HFCs from the liquidity perspective. It will help ease out the time for maintaining and managing cash flows for cash-strapped developers, and help them complete several stuck projects. That said, it will not address the other major issue faced by the sector – that of continuing low demand," said Anuj Puri, Chairman – ANAROCK Property Consultants.

Shishir Baijal, Chairman and Managing Director, Knight Frank said: “With the lower provisioning requirement for retail loans extended to the housing segment, we hope that the new measure will translate into lower cost of loans for home buyers, as well.  For the development side of the business, the long-standing industry demand for asset classification has been addressed. This will augment the liquidity situation for developers too. With these two significant initiatives by the RBI, the real estate sector will hope to make a faster come-back."

 

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