How RBI MPC Will Bring Relief To Commercial Real Estate Segment?

Gurugram Cyber City
Gurugram Cyber City

The Reserve Bank of India (RBI) announced its sixth bi-monthly monetary policy statement for 2019-20 on Feb. 6, Thursday. The Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, said it has decided to keep the policy repo rate unchanged at 5.15% and persevere with the “accommodative stance” as long as necessary to revive growth.

In another move which seems to be another major boost, the RBI MPC has decided not to downgrade any commercial real estate loan if a project gets delayed with a valid reason. The committee has decided to permit extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters by another year without downgrading the asset classification.

This will imply that promoters of a commercial real estate project will get an extension of another year without downgrading the asset classification if loans for projects have been delayed for reasons beyond their control. 

The move certainly has come as a big relief for the builders who were struggling to finish their projects. Banks too will no longer need to downgrade their asset classification and they expected to feel more motivated to finish off the projects on time. 

RBI MPC is getting thumbs up everywhere from the commercial real estate segment’s stakeholder to the  experts. 

“The policy announcement by RBI is thoughtful and encouraging as it will further boost the credit flow to the stressed residential realty sector. RBI’s decision to permit extension of date for commercial projects stuck for reasons beyond control of the developers under institutional debt will be instrumental in bringing much needed relief to developers. This is also significant in downgrading the assets by a year,” said Jaxay Shah, Chairman, CREDAI National, Money Control reported.

“We are delighted with the MPC stance that has taken note of the concerns of the real estate sector making significant announcements today. With the lower provisioning requirement for retail loans extended to the housing segment, we hope that the new measure will translate into lower cost of loans for home buyers as well.

The encouragement also comes to the development side of the business where the long – standing industry demand for asset classification has been addressed. This will augment liquidity situation for developers too,”  Shishir Baijal, Chairman and Managing Director, Knight Frank, said.

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