PMO, FinMin ask RBI to consider one-time loan recast for realtors

New Delhi: In an attempt to bail out the embattled realty sector, the Prime Minister's Office (PMO) and the finance ministry are actively contemplating a one-time loan recast for real estate developers and have sought the view of the Reserve Bank of India (RBI) on the matter, highly placed sources told Bureau Chief Nayantara Rai.

However, people familiar with the issue mentioned that while the proposal has been sent to the central bank, they have not asked for a blanket recast of all builders' loan but have asked the RBI to consider the proposal and give the banks the empowerment to make commercial decisions when they recast the loans. 

The channel learnt that the real sense of the proposal is to allow one-time rollover of debt, something that the UPA government attempted in 2008 when it was in the midst of a financial crisis started by the Lehmann Brothers. Note that the real estate sector is looking at a situation where it will have to make repayment meaning the builders will have to make a repayment of almost Rs 1 lakh crore from January to June of 2020.

Niranjan Hiranandani of Hiranandani Group said, "This means a lot. You have to understand that because of the multiple changes that took place in the policy level of the government in terms of demonetisation and GST etc., there has been huge pressure on the real estate sector and that is why we have a huge number of NPAs."

In fact, the Rs 25,000 crore sanction for the purposes of stress fund itself is an indication very clear that the markets are going into stress. But those are cases which are already today NPA or under NCLT. 

"Now, there are a large number of projects which are not NPA and not under



NCLT but are at the borderline. Because of lack of demand, many of these are not able to pay interests or they are required to be rollover because of extension of time. 

Some of them have not gotten permission. Some have gotten environment clearance late etc. Now, if you put all these cases into NPA or under NCLT, then all these projects will not be finished on time and there's going to be cascading impact of NPAs on the real real estate sector," he added.

He further said, "This is the reason why CREDAI and NAREDCO have been asking for this one-time rollover, similar to what happened in 2008 at the time of Lehmann Brothers fall. This one-time loan recast is to prevent other NPAs from happening."

It is worth mentioning that housing sales have not picked up, the market is dead and there is a serious possibility of defaults which could lead to a new kind of banking cum housing crisis. In order to prevent that and to be preemptive, this proposal has been sent based on the feedbacks from builders and stakeholders.

It may be noted that earlier this month, the Narendra Modi-led government had approved a plan to set up a Rs 25,000-crore alternative investment fund (AIF) fund to help complete over 1,600 stalled housing projects, including those declared loan defaulters or admitted for insolvency proceedings.

The money will be deposited in an escrow account of the entity after adequate due diligence following which it will be accordingly utilised for incomplete projects. Projects stuck with the National Company Appellate Law Tribunal (NCLT) will also be covered under the fund. The stalled projects will be funded until the completion after net worth assessment through RERA.