Status as on- 14/12/2020
Majority of the real estate projects are paralyzed due to liquidity crunch, affecting the interest of homebuyers. Thus, RERA through its letter sent in august, has requested RBI to restructure developer’s business loans to boost the real estate sector amid covid-crisis.
The covid-19 pandemic has pushed the real estate sector into severe crisis and economic slump. In Noida, Greater Noida and Yamuna Expressway only, more than 600 ongoing projects with at least Rs. 50,000 crore homebuyer’s investment are halted. Developers are facing liquidity crisis thus are unable to deliver flats to homebuyers.
The banks and non-banking financial institutions are reluctant in providing last-mile funding and have completely stopped fresh lending leaving developers with no options. Therefore, RERA has suggested RBI to restructure the existing loans to aid developers in construction and completion of projects.
Need for Restructuring
The developer’s groups like NAREDCO and the confederation of real estate developers association of India have been demanding loans restructuring for a long time for completion and delivery of stuck projects. The pandemic has created a significant fund crisis which is a no-win without bank’s support.
The restructuring will grant promoters leniency in loan installments, payment time, rate of interest and allow fresh borrowings among other benefits. Therefore, pushing forward the standstill projects towards delivery to homebuyers and thus reviving the real estate sector.
The RBI needs to take affective steps in order to tackle the financial crisis being faced by the developers. If it continues longer, the interest of homebuyers may be compromised due to delay or non-delivery of projects. But, it should be made sure that developers don’t escape their duties in cover of pandemic.
Disclaimer: The above article is based on the interpretation of the related laws and judicial pronouncements. The readers are expected to take legal advice before relying on this article. The author can be reached at email@example.com