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Rera to Plea for Debt Restructuring

Builders are finding it hard to meet the requirements for the approval of Special Window for Completion of Construction of Affordable and Mid-Income Housing (SWAMIH) grant. The pandemic induced lockdown has resulted in low demand and disrupted supply chain.

  • Check our detailed blog on SWAHIM here, LINK.

Lifeline for MSMEs

Finance Minister Nirmala Sitharaman granted the gift of debt restructuring to more than 5 lakh Micro, Small, and Medium Enterprises (MSMEs).

  • A Restructured Loan is where the parties have agreed to alter the terms, making it more favorable for the borrower in most cases. For example, the borrower may restructure a loan to receive a lower interest rate or monthly payment. Banks do so to avoid the borrower being declared a defaulter and loan having to be classified as a non-performing asset (NPA).

Reserve Bank of India (RBI) extended the restructuring scheme for MSMEs to December 31, 2020, well beyond the initial deadline of March 31, 2020. This move was expected to relax the already stressed demand and supply chain of the MSMEs.

India’s MSMEs sector

  • Contributes 28 percent to the nation’s GDP.
  • Makeup 40 percent of exports.
  • Employees about 11 crore people.

What debt restructuring meant for MSMEs?

Loans defaulted by companies will no longer be reflected as bad loans. Thier loan accounts won’t be declared NPAs by banks or NBFCs.

As a result,

  • Companies can avail of new loans, top-up loans, etc.
  • One time debt restructuring without asset classification downgrade.

AIFORERA to approach RBI

All India Forum of Real Estate Regulatory Authorities (AIFORERA) is gearing up to knock RBI doors as liquidity is becoming a major problem. In a press release, the Confederation of Real Estate Developers Association of India (CREDAI) and the National Real Estate Development Council (NAREDCO) have already conveyed the displeasure of builders.

They are unable to get new loans or even loan top-ups, blaming the difficult criteria for securing Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects or SWAMIH.

Making matters worse

“4,58,000 housing units are stalled across more than 1,600 projects.”

Developers cannot access top-up loans or new loans as Banks are unwilling until a one-time restructuring of loans is done. The pandemic induced economic crisis is hurting the demand. Unsold inventories point at another looming crisis.
Demands of developers are fair on many grounds. Stalled units, salaries, raw materials, and dip in fresh demand have already contributed a lot to their worries. Not getting new loans will add to their worries.

 

SOURCES:

  • Haidar, Faizan. “RERA News: RBI: RERA to Approach RBI for Loan Restructuring for Real Estate Sector.” The Economic Times. Economic Times, June 12, 2020, Link
  • Online, ET. “RBI Extends One-Time Restructuring Scheme for MSME Loans to December 31, 2020.” The Economic Times, Economic Times, February 6, 2020, Link

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