Housing demand, enquiries and sales volume, which posted growth in the first two months of 2020, have slowed to a grinding halt from March. Though the central bank slashed benchmark lending rate by 40 basis points on Friday and extended the EMI moratorium for another three months on term loans till August, a one-time debt restructuring continues to elude the real estate sector.

Cited as a major panacea for the realty sector battling the downturn induced by Covid-19, developers have been exhorting the government to consider a one-time restructuring of loans.

“It is the main prescription to alleviate the stressed real estate sector, which is the second-largest employer after agriculture in the country. We can’t have a piecemeal approach to tackle its woes. Realty developers have been seeking a one-time restructuring of stressed developer accounts since it would offer a better way to renegotiate timelines of repayment than all the legal complications that arise from force majeure ,” a Mumbai-based developer told BusinessLine on the condition of anonymity.

Stating that loan restructuring for sectors badly hit by Covid-19 has been discussed at every forum, the developer said the RBI’s move in extending the loan moratorium for another three months would help consumers with their EMIs.

‘Long-standing demand’

In April, in a bid to infuse liquidity into the system, the RBI had announced several measures to help banks, NBFCs and other financial intermediaries, and also give a boost to the real estate sector.

“Even at that time, the one-time debt restructuring, which is a holistic measure and would help allow the sector to breathe easy during the pandemic and aid in its quick recovery post Covid-19, did not come through,” the official said.

Deo Shankar Tripathi, CEO of Aadhar Housing Finance, said, “The three months’ additional moratorium till August is a timely move to protect customers from the delinquency tag and help lenders protect asset quality. However, this will adversely impact repayment culture. Spike in delinquency is expected after expiry of moratorium.”

Tripathi added the one-time restructuring of loans would have served the same purpose as the RBI’s announcement, and would have been more customer-specific.

Underscoring this, Uddhav Poddar, MD, Bhumika Group, said though it was a welcome move, “We were expecting RBI to allow a one-time restructuring of loans seeing the pain across sectors. We hope to hear some announcement in that regard soon.”

Yash Miglani, MD, Migsun Group, contended that one-time loan restructuring “that has been a long-standing demand is warranted at the earliest, as real estate is passing through a challenging phase.”

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd and Joint Secretary, Naredco Maharashtra, said the RBI announcement would jump-start economic revival.

“The measures that the RBI is taking to try and boost the economy are positive, however, they must insist on transmission of liquidity and the rate cuts to the borrowers from the banks and financial institutions, which is currently not happening as fast as it can,” said Poddar.

Interest rates

The outbreak of Covid-19 has turned the tables on realty, as construction activities have come to a sudden halt, and restrictions on site visits have shrunk property sales significantly. While project deliveries are expected to be delayed by at least 2-3 quarters, if not more, developers are also deferring any planned new launches.

Pradeep Aggarwal, Chairman, Assocham-National Council on Real Estate, Housing & Urban Development, said the situation for homebuyers might improve as home-loan interest rates are expected to come down further.

“If banks pass on the benefit, people who have decided to buy a home during the lockdown period will take a quick decision. Affordable housing will benefit the most, as buyers of this segment are very particular about EMIs. The government should now come out with steps to help the developers working in this segment, so that projects can be completed without any hindrance,” said Aggarwal.

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