RBI's Welcome Booster Shot For Real Estate

The government, authorities and the Reserve Bank of India have been constantly taking cognisance of the situation and announcing measures to mitigate the impact of COVID-19 on the economy. In the latest such move, the RBI on Friday announced a series of steps including cutting down the reserve repo rate, that is the rate at which banks lend money to the central bank, down to 3.75 per cent from 4 per cent earlier. It also decided to infuse Rs 50,000 crore in NBFCs to improve liquidity. Not only that, the apex bank also allowed restructuring of loans of real estate projects for upto one additional year. 

The real estate sector welcomed the intervention by the RBI at a time when the sector is going through a crisis. Hakim Lakdawala, Group Promoter, Goodwill Developers, said the decision of revising the reserve repo rate would ensure cash flow and liquidity in the market. 

"Allowing NBFCs, who have given loans to real estate companies to get similar benefits as given by the scheduled commercial banks, at a challenging time like this is an encouraging sign. Commercial real asset class loans will also observe a momentum as deferment of payment upto one year will allow developers more time to construct and deliver projects on time. With few construction activities looking to re-start post 20th April, we are hopeful that the situation normalizes and India moves to a path of recovery," he said.


Lincoln Bennet Rodrigues, Founder and Chairman, Bennet and Bernard Group, a leading luxury real estate developer, said that after announcing several relief measures in his previous address recently to counter the economic slowdown, these new measures announced by the RBI Governor Shaktikanta Das will definitely bring adequate liquidity in system, facilitate bank credit flow, ease financial stress and help India emerge as a leader in a post COVID-19 world. 

"Also the IMF projection of India to post sharp turnaround in 2021-22 is a promising indication for the economy to bounce back in the near future. Relaxations for real estate is also important as the sector employs a large number of people. These are certainly very good announcements particularly on the liquidity front and today's announcements will ensure that even the smaller players will also get access to liquidity," he added.

Measures announced by RBI are primarily aimed at largely to maintain liquidity in the system, facilitating and incentivizing bank credit flows and easing financial stress. According to Manju Yagnik, Vice Chairperson, Nahar Group, and Vice President of NAREDCO (Maharashtra), these steps would prove to be a booster dose to the economy, impacted due to COVID-19. RBI's move to cut reverse repo by 25 bps would enable banks to lend more to end consumers, thus helping prospective home buyers, she said. 

"Moves like provision of Rs 50,000 crore as a refinancing facility to SIDBI, NABARD and National Housing Bank and targeted long-term repo operation worth Rs 50,000 crore for NBFCs, Housing Finance Companies and micro finance institutions aim to boost liquidity in the system," Yagnik said.

Manoj Gaur, MD, Gaurs Group, and Chairman of Affordable Housing Committee, CREDAI (National), said the second announcement by the RBI during the lockdown period is an indication that the government is working to find out ways to address the situation. 

"Real estate was demanding the steps that could help the sector and now it is again up to the banks to take a leaf out of RBI announcement where it has talked about the real estate sector and extend a helping hand to real estate," he concluded.