Select Real Estate Shares Surge After RBI Announces Liquidity Measures

After the Reserve Bank of India (RBI) announced various liquidity measures for banks and non-banking finance companies (NBFCs), shares of real estate companies rallied up to 20 per cent on the BSE on Friday.

With specific sector in mind, in terms of the extant guidelines for banks, the date for commencement for commercial operations (DCCO) in respect of loans to commercial real estate projects delayed for reasons beyond the control of promoters can be extended by an additional one year, over and above the one-year extension permitted in normal course, without treating the same as restructuring.

The RBI said that loans given by NBFCs to real estate companies will also get similar benefit as given by scheduled commercial banks.

“It has now been decided to extend a similar treatment to loans given by NBFCs to commercial real estate. This will provide relief to NBFCs as well as the real estate sector,” RBI Governor Shaktikanta Das said in a statement.

According to sector experts, the measures taken for liquidity support to NBFCs, housing finance companies (HFCs) and microfinance institutions (MFIs) will help the cause of the real estate sector.

“The move on reduction of reverse repo rate by 25 basis points shall push banks to open up the credit flow to economic activities. Similarly, allowing a 90 day extension for asset classification to loans that have been granted moratorium window is a critical step to assuage credit quality concern of lenders,” Knight Frank India commented on RBI announcement.

As extended 40-day lockdown will impact the availability of migrant labours, there will be delay in construction activity in real estate projects. Taking note of the situation, the central bank has provided one year project completion extension on asset classification for NBFC loans to Real Estate segment.