Stating that proceeds from new sales and collection from the sold units have been severely affected due to coronavirus and the subsequent lockdown, a real estate sector body has sought the central bank’s intervention to permit a one-time restructuring of loans and to extend the moratorium period to six months for all dues, installments, EMIs and interest on loans.
In a letter addressed to the Reserve Bank of India, CREDAI MCHI has also requested the apex bank to not charge any interest during the lockdown period plus 30 days.
The body has asked RBI Governor Shaktikanta Das to intervene and facilitate one-time restructuring of loans and stimulate cash flow into the real estate sector.
“Having welcomed the RBI’s COVID-19 initiatives for the economy at large, CREDAI MCHI seeks further strategic and effective measures to combat the adverse implications of the virus on Indian realty and its stakeholders,” it said.
Proceeds from new sales and collection from the sold units have been severely affected. Coupled with complexities arising from collection of licence fees/ rentals from tenants who have been forced to shut down their establishments in retail malls and office complexes have added to the industry’s liquidity woes, it said in the letter.
To eliminate short-term uncertainty and long-term risks, CREDAI MCHI wants all lending institutions, governed by the RBI, to allow a moratorium of six months on all dues and overdue installments/EMI/interest of all loans, including term loans, which are outstanding as on March 1, 2020
The group also called for a one-time restructuring of loans. “Where lending institutions find that the project is cash-flow positive as defined by the finance ministry for the SWAMIH Fund, a One-Time Restructuring (OTR) is more beneficial in the interest of the Lending Institutions, Borrower and the Apartment purchasers, and thus should be allowed as was permitted in GFC 2008,” it said.
A clarification needs to be issued stating that dues and overdues of all loans (including loans categorised as SMA0, SMA1, SMA2 and NPA) as on March 1, 2020, shall be granted this moratorium for a period of six months.
It has also requested that no interest should be charged for the period of lockdown plus 30 days. No penal interest or default interest shall be charged for this differed period from March 1, 2020 to August 31, 2020.
The developers’ body has said ‘Term Loan’ to include Working Capital Term Loan (WCTL), Funded Interest Term Loan (FITL) or Debentures subscribed by the lending institution.
“Interest payable on term loans for the period 1st March 2020 to 31st August 2020, should be allowed to be capitalised, payable at the end of the period of term loan. All the term loans should be directed to be extended by six months with the same terms and conditions,” it said in the letter.
In the case of deferment of interest on working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions should allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020. The accumulated interest for the period shall be paid over a period of six months after the expiry of the deferment period, it said.
“CREDAI MCHI lauds the RBI’s continuous support for the economy and its stakeholders which is extremely reassuring given the unpredictable scenario. However, considering the current predicament of Indian real estate, the industry yearns for more decisive and potent initiatives that will reinstate stakeholders’ belief. We request the RBI to permit one-time restructuring of loans and stimulate cash flow in the industry, to enable the sector to continue to be India’s strongest economic pillar for the foreseeable future,” CREDAI MCHI president Nayan Shah said.