Long way for real estate companies’ pain to vanish despite relief measures by RBI, govt; here’s why

May 5, 2020 2:09 PM

RBI and the government have announced various relief measures in favour of the real estate sector but the effect of the pandemic will take some time to disappear from the market.

MahaRera’s extension of the timeline for completion of projects by 3 months has given developers time to deal with the situation, however, with the rising number of cases, there seems a long way ahead.

 

Hakim Lakdawala

The novel coronavirus has led to a country-wide lockdown, simultaneously bringing all the economic activities to an absolute halt. Like all the other sectors, the realty sphere has faced the brunt of the same and has been crippled by the situation. Reserve Bank of India has been relentlessly working towards bringing the nation out of this economic slowdown by driving home multiple measures that will ensure the soundness of the financial system and markets along with the liquidity as well as the smooth flow of finance to all stakeholders, especially those who are worst hit by the downsides of the lockdown. Additionally, regulatory bodies, at all levels, have also been devising ways to pull the real estate sector from the pit of stagnation and continuous losses.

Experts have stated that the endeavours of RBI and other government authorities will enable numerous operators to stay afloat. Further, the industry also welcomed these measures with open arms and viewed them as a harbinger of relief.

Here are some of the guidelines:

Extension of deadline ordered by MahaRERA

The Maharashtra Real Estate Regulatory Authority said in a statement that it has decided to extend the validity span for the registration of real estate projects, whose date of completion or extended completion date gets over on or after March 15th 2020, for three months. Such a situation is a force majeure with work being stalled completely. We are happy that MahaRera has extended the timeline for completion of projects by 3 months, which has given developers time to deal with the situation. However, with the number of cases rising there seems a long way ahead.

DOCCO relief

DOCCO stands for the date of commencement of commercial operations. The RBI has introduced a yearlong extension in the DOCCO of project loans for those commercial real estate projects which have witnessed a delay due to reasons beyond the control of promoters. This initiative has been deemed to be a huge step as it is going to provide much-needed relief to the developers who are running extremely short on cash. The measures announced aim to maintain adequate liquidity in the system, facilitate bank credit flow and ease financial stress.

Solutions for NBFCs

The RBI recognises the troubles COVID-19 has created for repayments of loans; hence, it has extended the moratorium on NBFC loans to commercial real estate projects by one year. Further, a window of INR 50,000 crore under TLTRO has been offered to NBFCs, this incremental liquidity can be utilised for onward lending to the realty sector. By allowing NBFCs, which have given loans to real estate organisations, benefits similar to those offered to commercial banks, during such gruesome hours, is a very encouraging sign. We are hoping that construction activities now being re-started in a few regions will slowly move ahead.

Hakim Lakdawala is Group Promoter at Goodwill Developers. Views expressed are the author’s personal. 

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