Is RBI’s relief for real estate only a drop in ocean? Here’s why realty has long wait before recovery

By: |
April 17, 2020 5:32 PM

The RBI’s relief has come at a time when the industry is going through a lifetime low sentiment and has come to a halt.

"The real estate sector, which is already in a slump since last year, is presently experiencing almost 65 per cent payment default from customers paying the installments linked to construction," ICC Director Rajneesh Shah said in a release.Among various fiscal provisions, the Reserve Bank has set aside Rs 10,000 crore for National Housing Bank (NHB) to smoothen the flow of funds to the housing finance institutions.

Coronavirus and the nationwide lockdown have made a severe impact on the real estate sector, which has a long wait for recovery, despite the stimulus provided by RBI today. Among various fiscal provisions, the Reserve Bank has set aside Rs 10,000 crore for National Housing Bank (NHB) to smoothen the flow of funds to the housing finance institutions. The RBI’s relief has come at a time when the industry is going through a lifetime low sentiment and has come to a halt. The supply chains for obtaining construction material have been disrupted and labour workforce has migrated to home in search of alternative sources of livelihoods such as agriculture. Besides, the non-availability of transport has added to the woes of the industry.

“We welcome the move of the RBI to give some breather to the economy and infuse liquidity in the market, however it doesn’t really change anything for the real estate industry as a whole,” said Rahul Gover- CEO, SECCPL. Actual cash flow and relief will be seen only when the lock-down is lifted and we are over the COVID -19 crisis, Rahul Grover added.  The industry needs continued support while the already ailing real estate sector has been crippling with coronavirus pandemic. The steps undertaken by the Reserve Bank to ease the liquidity concern of banks, NBFCs and other financial intermediaries shows the severity of liquidity issues faced by the financial system and the real estate sector.

Knight Frank India chairman & MD Shishir Baijal also said that the real estate segment will have a long journey to make as the ongoing crisis has retracted the end-user confidence to its lowest levels ever, which will push any kind of real estate purchase decisions to the distant future. It is thus expected that even after the lockdown is lifted, there will be fewer homebuyers in the market as, by that time, the homebuyers will be more risk-averse and will prioritise to maintain a financial cushion for themselves before investing in realty.

Meanwhile, NBFCs outstanding credit to the commercial real estate stood at Rs 1.29 lakh crore as of end September 2019, Ramesh Nair, CEO & Country Head, JLL India said citing RBI.  The relaxation of NPA norms and extension of one year for commencement of projects to real estate developers by NBFCs will provide the much-needed relief to the sector, he added.

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