Borrowers, be the homebuyers or real estate developers, reeling under monetary pressure brought on by the Covid-19 pandemic and those who availed the benefit of EMI moratorium have benefited.

“ For developers, a one-time loan restructuring is a better option, but a further extension of the loan moratorium will certainly be welcome,” said Shobhit Agarwal, MD and CEO, Anarock Capital.

“Previously, the RBI had also converted the accumulated interest for the moratorium period into a term loan. This means that the borrower will not have to immediately repay the accumulated interest on the loan once the moratorium ends,” he added.

Now it is reported that the RBI is again mulling the possibility of extending this moratorium period. In that case, Agarwal said “Whether it does so or not, borrowers must consider the pros and cons of availing of this facility if it is approved. Should they further defer their EMIs or stretch themselves and continue servicing their loans as per schedule?”

“Here no blanket advice can be given for this dilemma - as always, the devil lies in the detail. It is important to remember that this is no ‘free lunch’ and that there is fine print to consider. To some homebuyers, the loan moratorium is a temporary respite and provides additional time to sort out their finances. To others, it adds to the monthly financial burden since the EMI amount would increase once the benefit period is over,” he added.

Loan Moratorium Benefits

Talking about benefits of the loan moratorium, Agarwal said that for developers, it gives them more time to sort out their finances. Residential sales across cities are gradually reviving with the lockdown being lifted. With the festive season approaching, housing sales activity is likely to gather momentum. Therefore, an extension will give developers the time to collect funds via sales and later service their loans via these funds once the moratorium period ends. The fact that non-payment of EMIs will not result in falling into banks’ bad books is an added relief.

He added that for individual borrowers, it will help both salaried and self-employed borrowers facing difficulties with servicing their car, home and personal loans due to the unique exigencies of the pandemic. It is an opportunity to regain financial clarity. Individual borrowers are also safe from unfavourable action by banks due to non-payment of EMIs, which would otherwise adversely impact their credit score. The RBI has ensured that availing of this moratorium will not be considered a default for the said period.