Seeking relaxation in the special mention account (SMA) criteria, the developers have asked to not classify real estate projects into SMA-1 for a period of up to 90 days.
Real estate developers have sought a moratorium of nine months to repay their loans and relaxation in special mention account criteria, among other sops, stating that COVID-19 has severely impacted their business cycles.
In a letter to Hardeep Singh Puri, minister for housing and urban development, real estate developers association Credai on Wednesday said the sales velocity and receivables have been hit “drastically”, leading to default or delay in fulfilling financial commitments to the banks. Consequently, the association has asked the government to allow all interest and principal repayments falling due over the next three months in realty projects be put off and recovered over the next nine months.
Seeking relaxation in the special mention account (SMA) criteria, the developers have asked to not classify real estate projects into SMA-1 for a period of up to 90 days. Instead SMA-1 be classified for period of 90 to 120 days and SMA-2 for a period of 120 to 150 days.
The current Reserve Bank of India guidelines for resolution of stressed assets provides for classification of accounts with overdue up to 30 days as SMA-0, between 30 and 60 days as SMA-1, and between 60 and 90 days as SMA-2. In case of a lender’s exposure being more than Rs 5 crore, the SMA classification is immediately reported.
Also, Section 6 of RERA (Real Estate Regulatory Authority) provides that registration granted under Section 5 may be extended by the authority due to force majeure. These conditions include “war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project”.
Stating that COVID-19 gets covered under any other calamity caused by nature, developers have asked to issue an advisory to RERA in all states to extend the time of completion of real estate projects as well as exempt the penal charges for a period of one year.
Specifically for malls, multiplexes, gymnasiums, etc, Credai has stated that they should be allowed benefits under their insurance cover by treating COVID-19 as force majeure.