In an effort to help the real estate sector, the Reserve Bank of India on Thursday extended by a year the date of commencement of commercial operations of project loans for delayed office projects.
The extension will help commercial real estate projects that have been delayed for reasons beyond the control of promoters, the RBI said in a statement after its monetary policy review.
The decision is in line with the treatment accorded to other project loans for non-infrastructure sector, the central bank said, adding that this would complement the initiatives taken by the government of India in the real estate sector. It will announce the details shortly.
The step will help the real estate sector in general and commercial property developers in particular. Commercial real estate is one of the few bright spots in an otherwise gloomy real estate ecosystem while the residential segment has suffered due to a liquidity crisis and weak sales.
The RBI’s step will help banks avoid non-performing assets and give impetus to the commercial segment, analysts say.
“This is a big move and will bring the much-needed relief to the cash-starved real estate sector - and to both developers and housing finance companies from the liquidity perspective. It will help ease out the time for maintaining and managing cash flows for cash-strapped developers and help them complete several stuck projects,” said Anuj Puri, chairman at ANAROCK Property Consultants.
The RBI also said that it has taken other steps to boost bank credit to certain sectors such as automobiles, residential housing and micro, small and medium-sized enterprises.
It said that commercial banks can now deduct the equivalent of incremental credit they disbursed as retail loans to these segments, over and above the outstanding level of credit at the end of January 31, from their net demand and time liabilities to maintain the cash reserve ratio.
This essentially means that banks can lend more for flats without worrying about cash they need to hold in balance.