KV Kamath panel's recommendation may reboot stressed real estate sector

"The recourse provided the much-needed elbowroom to developers and suppliers of raw materials to keep their businesses afloat and viable. Further, it was also timely for individuals who had availed home loans as they were reeling under the pressur...

Bengaluru: The KV Kamath panel’s recommendations on resolution framework for Covid-19 related stress sectors, accepted by the Reserve Bank of India (RBI) is expected to provide a breather to stressed real estate developers and individual borrowers in the housing segment alike.

The real estate sector has been highlighting severe liquidity crunch and its negative impact on the sector even before Covid-19 crisis.

"The recourse provided the much-needed elbowroom to developers and suppliers of raw materials to keep their businesses afloat and viable. Further, it was also timely for individuals who had availed home loans as they were reeling under the pressure of discontinuity of steady income due to the fragile employment scenario, ” said Ramesh Nair, CEO & County Head (India), JLL.


In August, the Reserve Bank of India’s announced a one-time restructuring term loans with up to 2 years moratorium, without classifying them as non-performing assets (NPAs), based on the recommendation of the expert committee steered by KV Kamath.

"This is expected to benefit real estate developers including suppliers of key raw materials to reset their debt and provide a fresh lease of life to service their debt prudently. Also, this will enable corporates to focus on restarting their business in the next normal with renewed vigour and vitality, ” said Nair.

Kamath Committee in its latest report has given recommendations for 26 sectors including real estate, auto, aviation and logistics that may be factored by lending institutions such as banks while finalising the loan resolution plans.
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“After a long time something concrete without much confusion has come out with sufficient flexibility to lenders. This has also brought a strict sense of discipline on all lenders with respect to signing of inter-creditor agreements, which is must for successful resolution,” said Nirmal Gangwal, Founder and Managing Partner, Brescon Advisors, a boutique investment banking firm, which specialises in corporate debt resolution.

The industry body's consideration of real estate associations of India has urged the RBI and Government of India through the Ministry of Finance that the accounts marked as SMA1 & SMA2 should also be made eligible for loan recast. The demand for additional credit facilities on existing credit limits would also address the stress on the sector to a certain extent.

“The extension of moratorium is an important step towards giving developers the much needed time to recover from pre and post COVID-19 stress and fulfill their financial commitments and complete stalled projects,” said Satish Magar, President, CREDAI National

In August, the central bank also announced further liquidity infusion to the tune of Rs 5000 Crores to National Housing Board (NHB) which should be able to provide some relief during these times of crisis.
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The enhanced finance flow should see developers in need of last mile funding being able to complete their stalled projects.

"Banks will decide the specifics for loan restructuring. In all, reasonably sound players with good financials will stand to benefit from this move, ” said Anuj Puri, Chairman - ANAROCK Property Consultants.
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The real estate sector saw a decline in the first half of 2020 in residential sales across the top seven cities while launches remained constrained on the back of bleak economic environment and muted consumer sentiment.
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