November 27, 2019

RBI Likely To Allow One-Time Recast Of Loans Availed By Real Estate Firms At The Behest Of Prime Minister’s Office

[ By Bobby Anthony ]


The Reserve Bank of India (RBI) is likely to consider proposals from the Union Finance Ministry and the Prime Minister's Office to help real estate companies access hurdle free funding without the non-performing asset (NPA) tag and complete unfinished projects.

The RBI may let banks decide about not classifying their loans as defaults or special mention accounts (SMA) and allow a one-time recast of selective real estate companies' loans.

If RBI allows banks to one-time rollover realty loans recast to temporarily remove the NPA or even SMA accounts tag, it will be done on a case-to-case basis for projects which are at an advanced stage, but stalled due to funding because of repayment woes.

The facility may not be available for the entire industry, but only for sound projects about which banks will decide on commercial judgment, after being empowered by RBI.

A one-time recast would mean a one-time rollover for real estate developers for loan repayments which will not classify their loans as SMA or NPA. This will help them approach funding agencies or market without having any doubt on their profiles.

The PMO, Union Finance Ministry and the RBI have taken several steps to resurrect the real estate sector, seen as a key sector to reflect growth and demand.

Recently, the government had announced the setting up of a Rs 25,000-crore alternative investment fund to revive the realty sector after a survey showed that around 4.58 lakh housing units were stuck in India.

Union Finance Minister Nirmala Sitharaman had stated that an internal survey showed that around 4.58 lakh housing units were stuck in India with more than 1,600 realty projects stalled.

The cabinet also approved an establishment of a 'special window' to provide priority debt financing for completion of stalled housing projects in the affordable and middle-income housing sector.

Besides, real estate industry associations like Confederation of Real Estate Developers Association of India (CREDAI) and National Real Estate Development Council (NAREDCO) have been seeking this one-time rollover.

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