As expected, RBI has kept the repo rates unchanged at 5.15% while maintaining an accommodative stance. Though a rate cut would have been welcomed by the real estate sector as a sentiment-boosting factor, a meagre change in repo rates would have done little to significantly boost consumer sentiments. As such, previous rate cuts did prompt some banks to lower their interest rates in the recent past – but that had no significant impact on residential real estate sales.
However, in a major relief to the real estate sector and further complementing many of the previous initiatives by the government in 2019, RBI has decided to extend the restructuring of project loans by a year. Loans for projects that have been delayed for reasons beyond the control of their promoters have been extended by another one year without downgrading the asset classification. This aligns with the treatment accorded to other project loans for the non-infrastructure sector.
This is a big move and will bring the much-needed relief to the cash-starved real estate sector – and to both developers and the HFCs from the liquidity perspective. It will help ease out the time for maintaining and managing cash flows for cash-strapped developers and help them to completing several stuck projects. That said, it will not address the other main issue prevailing in the real estate sector – that of continuing low demand.
