Stating that the second wave of COVID-19 has had a devastating effect on the real estate sector, Naredco’s UP chapter has urged finance minister Nirmala Sitharaman for a one-time restructuring of disbursed project loans and for amending the guidelines of the AIF-SWAMIH Fund to provide cashflows to existing lenders.
Naredco-UP has sought a one-time rollover/restructuring of disbursed project loans, saying that "Existing project loans from banks and NBFC's be re-scheduled irrespective of NPA status where the projects are commercially viable having positive net worth," the letter by Naredco-UP chapter to the finance minister said.
The association has requested the FM to direct banks and other financial institutions to allow fresh project loans as last-mile funding to complete the stalled projects, with a moratorium of one year for principal and interest.
Naredco-UP has demanded that the government should relax the norms for the Rs 25,000 crore stress fund SWAMIH which has been created to complete stalled projects.
"Government of India (GOI) through Ministry of Finance (MOF) had set up the AIF – SWAMIH Investment fund of Rs 25,000 crores as a special window to expedite completion of stalled affordable and mid-Income housing projects and infused Rs 5,000 crores. However, due to the rigid terms and conditions of the Fund, very few developers only could avail the benefit of the same. The guidelines of this AIF-SWAMIH may be amended to provide for sharing of the cash flows with the existing lenders, to the extent that servicing the debt requirements," it said.
It said that instructions should be given to the banks to issue NOC for priority charges in favor of SWAMIH Fund. "We, as a representative body of real estate developers, draw your urgent attention to the terrible market condition and request your kind consideration for the announcement of policy decisions for the revival of the real estate sector to tide over this unprecedented crisis," the letter by Naredco-UP president R K Arora said.
“The crisis is much deeper this time and thus needs immediate steps for revival of the real estate sector and these extraordinary harsh time require a one-time restructuring like the one in 2008, to bring normalcy to the sector which once revived has the potential to majorly contribute to a V-Shape recovery of the Indian economy,” the letter said.
Thousands of projects are struggling to find last mile funding from banks and financial institutions, and thousands of homebuyers with home loans of approximately Rs 19 lakh crore are in peril and are reluctant to pay their instalments. Most of these projects were started in 2010-12 with a definite completion plan within 5-7 years, the letter said.
Since the COVID-19 cases are yet to subside, it is expected that the construction will suffer for another six months' at least, and even after that, it will take time to restore the material supply chain, re-mobilization of manpower and machines, the letter added.
In November 2019, the Central government announced a Rs 25,000-crore SWAMIH Investment Fund to help complete over 1,500 stalled housing projects, including those that have been declared non-performing assets (NPAs) or had been admitted for insolvency proceedings. The move was to help 4.58 lakh housing units across the country. Only RERA-registered projects with a positive net worth are to be provided funding.
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