The KV Kamath committee prepared a resolution framework for sectors hit by coronavirus pandemic. The Reserve Bank of India accepted the committee’s resolution frameworks recommendations that are expected to provide relief to stressed real estate developers and individual home loan borrowers.
The real estate sector already reeling under the pressure of subduing demand, severe liquidity crisis and slowing the economy even before the coronavirus pandemic struck. After quite a while something concrete announced without a lot of disarray with adequate flexibility to the lenders. The panel’s recommendations will bring a firm discipline on all lenders while signing of inter-creditor agreements.
The Kamath committee prepared a resolution framework and given recommendations for 26 sectors including real estate, automobiles, aviation, and logistics. Based on Kamath committee panel, the central bank of India announced a one-time restructuring of term loans with a moratorium period of up to 2 years, without classifying them as non-performing assets (NPA). Banks will decide the specifics of term loan restructuring.
The panel’s recommendations for real estate comes as a blessing in disguise. It is a much-needed alleviation and space for developers and raw material suppliers to keep their business solvent and operating. Relief for individuals who have availed home loans and unable to repay their instalments due to unavailability of funds, significant salary cuts, job losses and volatility in the market ahead.
This is expected that the committee’s recommendations will help developers and raw material suppliers to reboot their business post coronavirus pandemic. It will reset their debt and provide a fresh lease of life to services their debt accordingly.
In the recent past, to address the liquidity crunch in the real estate sector the Reserve Bank of India took several steps like providing last-mile funding, SWAMIH Investment Fund, etc. In August, the Reserve Bank of India also further announced the liquidity infusion of INR 5,000 crore to National Housing Board (NHB) to provide relief during these times of crisis.
Several industry bodies stated that the extension of the moratorium period is a positive step towards giving some relief to developers and suppliers to recover from pre and post coronavirus pandemic crisis. This will encourage several banks and financial institutions to provide last-mile funding for the completion of stalled projects.