A Slew of Measures to Kick Start the Activities

The Government had announced several measures in March this year to ease the financial stress in the wake of Covid-19. The steps have been further supplemented by the RBI's announcements to slash the reverse repo rate by 25 bps and the Targeted Long-Term Repo Operations (TLTRO) 2.0 worth Rs. 50,000 crores to the NBFCs, MFIs and HFCs. Response from the Realty Sector.

Improving the Credit Flow

Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure Limited

The Covid-19 outbreak has disrupted all businesses and the real estate sector, which forms the backbone of several other industries, has been worst hit as all construction has come to a grinding halt. Amidst all this, we are thankful to the government for providing financial support during the crisis. In particular, the RBI's decision to slash reverse repo rate by 25 basis point and additional liquidity measures for the National Housing Bank (NHB) will provide some relief to the sector, which had already been dealing with its own set of issues prior to the pandemic. These measures announced by the RBI are bound to encourage banks to lend more, thereby improving the credit flow and giving more purchasing power to homebuyers and investors.

RBI's move allowing NBFCs to extend realty loan by 1 year, if projects are delayed due to unavoidable circumstances, will also provide the much-needed support to the sector. Additionally, the allowance of similar benefits for loans given by NBFCs to real estate companies as given by scheduled commercial bank is a great step that will boost the sector growth. At times like this, agility is key in improving the economic situation of any nation. We are glad that the RBI has demonstrated agility by announcing a slew of measures to support the real estate sector, corporates and the economy at large. However, the two major agendas that the Government must focus on to truly help the sector are the arresting of the Covid-19 outbreak and reviving the economy to its optimal level.

Easing Financial Stress

J C Sharma, VC & MD, SOBHA Limited.

The Government had announced several measures in March this year to ease the financial stress in the wake of Covid-19. Today, these steps have been further supplemented by the RBI's announcements to slash the reverse repo rate by 25 bps and the Targeted Long-Term Repo Operations (TLTRO) 2.0 worth Rs. 50,000 crores to the NBFCs, MFIs and HFCs. We are delighted and welcome these efforts to boost liquidity further and ease financial stress. These instrumental steps are timely and very assuring.

We believe that the reduction of the reverse repo rate to 3.75% from the recent 4% will make lending attractive for financial institutions, which will hugely benefit homebuyers and the real estate sector.

Further, we believe that Rs. 50,000 crores of infusion into the financial system will ease liquidity issues faced by the NBFCs and the MFIs which will result in more funding to the corporate sectors. More importantly, the loans given by the NBFCs to real estate sector will avail similar benefits as given by commercial banks. This was a required step towards both the NBFC and the real estate sector.

Additionally, the RBI has provided for one year of project completion extension on asset classification for NBFC loans to the CRE segment, which is laudable keeping the lockdown and migrant labour workforce issues in mind.

The focused measures to keep credit flowing into critical areas of the economy will help revive the economy. The fact that the projected India's GDP growth of 1.9% by IMF is highest in G20, shows the country's resilience in challenging times. We believe India will make a turnaround in times to come.

Much-Awaited Move

Kaushal Agarwal, Chairman, Director, The Guardians Real Estate Advisory

Liquidity, recapitalisation and increased access to funds for MSME's is the crux of the announcements made by the RBI governor. The RBI's decision to reduce the reverse repo rate further by 25 bps and reduction in LCR will help bring liquidity in the market place with banks lending further. Crucially, the banks need to give up the cautious lending approach to ensure delivery of RBI measures on the ground. The refinance facilities of Rs 50,000 crores for NABARD & NHB, and mandatory 50% investment of TLTRO-2 to small, mid-sized NBFC's will bring much needed capital for HFC's & NBFCs, a move that was much required. The extension of realty loans by a year and NPA Classification relief for SMA accounts will go a long way in helping developers and MSME's tide over the ongoing crisis.

Providing Relief to Developers

Anuj Puri, Chairman - ANAROCK Property Consultants

In a major move to boost liquidity in the market, the RBI announced several additional measures to accelerate the economy and facilitate bank credit flows in Lockdown 2.0. Among the various measures announced, commendably its allotment of INR 10,000 crore to National Housing Bank is a big move for the real estate sector reeling under the liquidity crisis. It will help provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in COVID-19 times.

Further, RBI has reduced the reverse repo rates by 25 bps - it now stands at 3.75%. This is another big step as the rate cut will definitely send out positive signals in the current times, and will enable banks to lend even more.

Also, in another major relief to developers, the RBI has further extended the date of commencement of commercial operations (DCCO) of project loans for commercial real estate projects which are delayed for reasons beyond the control of promoters. This is indeed a big move and will bring much-needed relief to cash-starved developers. It will help in easing out time for maintaining and managing cash flows for these developers.

To Ease Liquidity

Ramesh Nair, CEO & Country Head, JLL India

The steps undertaken by the Reserve Bank of India to ease the liquidity concern of banks, NBFCs and other financial intermediaries is an acknowledgement of the liquidity issues faced by the financial system of the country as well as the industry. The announcement will give an initial fillip to the real estate sector. The Central Bank's focus to provide credit flow to NBFCs is a key step. This will provide a boost to various real estate activities.

As per the latest data by RBI, NBFCs outstanding credit to the commercial real estate stood at INR 1,29,359 crore as of end September 2019. The relaxation of NPA classification 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. The refinance facility to the extent of INR 10,000 crore to NHB is a welcome move to provide the much needed liquidity to Housing Finance Companies.”

Incentivise Bank Credit

Kamal Khetan, Chairman and Managing Director, Sunteck Realty

RBI recent announcements are steps that would maintain adequate liquidity in the system, incentivise bank credit flows and lessen the financial stress. The encouraging signs will uplift the positive sentiment of the real estate sector. The relaxation of asset classification norms will ease the stress on NBFC lending to the real estate sector besides ensuring stable costs of funds and avoiding distress sale of assets by developers. The move to conduct TLTRO 2.0 with an amount of Rs 50,000 crore will help NBFCs and HFCs as banks would be required to allocate 50% of the funds to them. The special finance facility extended to financial institutions, especially NHB will further boost the credit to the realty sector. In the current time where market sentiments need to improve, the announced measures will help the organized and established developers to gain maximum mileage and drive sales in the upcoming time.

Preserving Financing Stability

Anshuman Magazine, Chairman & CEO – India

RBI's recently announced liquidity measures are a clear step towards encouraging liquidity in the banking system, preserving financial stability and supporting overall economic growth.

 In the wake of the evolving Covid-19 situation; the announcement in the reverse repo rate cut from 4 per cent to 3.75 percent should further push banks to lend to the productive sectors of the economy. In addition to this, RBI has also announced that loans given by NBFCs to real estate companies to get similar benefit as given by scheduled commercial banks. Announcement of refinancing facility for leading financial institutions such as NABARD and SIDBI, relaxation of stressed asset classification and resolution norms and provision of another window of Targeted Long Term Repo Operations worth INR 50,000 cr will provide additional fiscal stimulus to the economy. To further ease flow of funds to the housing sector, the National Housing Bank (NHB) has also been provided with a refinance facility of Rs. 10,000 Cr. for Housing Finance Companies (HFCs) as additional liquidity for individual housing loans, which is a much needed boost at this time.

Facilitates Credit Flow

Anuj Khetan, Director, Vijay Khetan Group

In the wake of the Covid-19 crisis, the RBI's announcement to reduce reverse repo rate by 25 basis points and additional liquidity for National Housing Bank will accelerate and facilitate bank credit flows towards the already stressed real estate sector. The allotment of Rs 10,000 crore to National Housing Bank will provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in COVID-19 times. It is a welcome move and will offer liquidity to spice up the nationwide financial system. The banks should immediately transmit rate cuts to consumers and bring down home loan interest rates to 6%. This will help to push home buying and offset salary cuts that employees would be facing in the near future to prevent NPA. Also, additional measures such as one-year moratorium for commencement of business operations (DCCO) of project loans for real estate projects that are delayed for reasons beyond the control of promoters is a major relief and will provide much-needed aid to cash-starved builders.

To Kick Start Economic Activities

Jayesh Rathod, Executive Director, The Guardians Real Estate Advisory

In these testing times, the government’s decision to allow construction activity brings in much needed relief. Like we have maintained, the beginning of construction activity, though with rightful caveats, will not just help the sector but will kick start economic activity in the country. The resumption of construction activity brings wages to labourers, cash flow to developers and more importantly credit growth for banks. Quite a few developers will be able to start construction activities post 20th April, as they fall within the criteria set by the Ministry of Home Affairs of having labour camps at their respective sites for construction workers. As many workers haven’t been able to travel back to their native place and we are observing developers taking care of them at site, the order is bound to have a favourable impact.

need extensive stimulus

Ashwin Reddy, MD, Aparna Enterprises

We truly appreciate the efforts of the government towards the containment of the pandemic. We are hopeful that the government will take into consideration the economic impact of the extended lockdown on industries, especially the building material industry. The Construction and Building Material industry contributes nearly 8% of the GDP and employs around 50 Million of workforce. The lockdown has impacted the industry significantly and has led to huge losses. Recovering from the shock will require extensive stimulus from the government and we are optimistic that the government will look into it.

Hits: 130