PNB Housing Finance, LIC Housing, Indiabulls shares fall as clarity emerges on real estate loan recast

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Published: February 12, 2020 3:29:26 PM

Shares of housing finance companies such as PNB Housing Finance, Indiabulls Housing Finance and L&T Finance Holdings slumped today after clarity emerged that RBI’s relaxation of real estate loan repayment rules was applicable to only scheduled commercial banks and small finance banks, but not to housing finance companies.

Shares of housing finance companies such as PNB Housing Finance, Indiabulls Housing Finance and L&T Finance Holdings slumped today after clarity emerged that RBI’s relaxation of real estate loan repayment rules.

Shares of housing finance companies such as PNB Housing Finance, Indiabulls Housing Finance and L&T Finance Holdings slumped today after clarity emerged that RBI’s relaxation of real estate loan repayment rules was applicable to only scheduled commercial banks and small finance banks, but not to housing finance companies. Earlier last week, the Reserve Bank of India allowed extending the ‘Date of Commencement of Commercial Operations (DCCO)’ for real estate projects, giving the developers a breather from having to make repayments even before the completion of the projects.

Shares of housing finance companies slipped, with L&T Finance Holdings losing as much as 3.2 per cent; Indiabulls Housing Finance falling 2.91 per cent; and PNB Housing Finance dropping 1.18 per cent. LIC Housing Finance shares were down 2.40 per cent. Housing finance companies shares had rallied on February 6 when the RBI had allowed the extension of DCCO by a year, on the hopes that HFCs would also be able to avail the benefit. Shares of Indiabulls Housing Finance had jumped by 15.56  per cent after RBI’s announcement on DCCO on February 6.

The Reserve Bank of India’s decision, that DCCO would be allowed to be extended for project loans for commercial real estate by a year if the reason for the delay is beyond the control of promoters, came on the sides of the Monetary Policy Committee decisions that were announced on February 6. “The decision is in line with treatment accorded to other project loans for non-infrastructure sector, the RBI had said. The move would complement the initiatives taken by the government of India in the real-estate sector,” it said . Detailed instructions on the decision will be issued by the Central Bank soon.

RBI had issued a notification on February 7 on the DCCO extension, addressed only to scheduled commercial banks and small finance banks. “In case of CRE projects delayed for reasons beyond the control of promoter(s), banks may restructure them by way of revision of DCCO up to another one year and retain the ‘standard’ asset classification if the account continues to be serviced as per the revised terms and conditions under the restructuring,” the central bank had said in the notification.

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