Time has come to restructure home loans for individual borrowers. The real estate industry fears, if no action taken by banks, the NPAs will rise.

By Varun Singh

With the pandemic and the following lockdown, the biggest impact is seen on the middle class. There have been several job losses, and the fear is that home loan defaults may start.

The real estate industry believes that it is time that the banks restructure home loans for individual borrowers.

The industry says the time has come where banks need to take steps so that they can avoid NPAs.

Arvind Goel, a Navi Mumbai based developer says, “Banks should talk to their home loan borrowers. Many have lost their jobs and there could be defaults too. Banks should restructure the loans considering individual cases, or else there would be a large number of NPAs, which is not good for neither the banks nor the real estate industry.”

Even Ashok Mohanani, of Ekta World says, that it’s very critical for RBI to allow a one time restructuring, similar to the Lehman crisis they permitted in 2008, though that crisis was not as severe as the present unprecedented crisis which has hit the whole globe.

Mohanani’s argument is that with this, RBI stands nothing to loose as they wont have to pump in any further money in the system, like the SWAMIH fund which is only for Rs 25,000 crore. The industry would otherwise require 5/6 more such funds which would bring in at least 1,50,000 cr in the system . “The simplist solution is to allow one time restructuring which will give a breather to the industry and will avoid any NPAs. Real Estate has the least number of NPAs,” he said.

Due to the COVID-19 and subsequent lockdowns across the country, the RBI allowed banks and other lending institutions a three-month loan moratorium on EMIs from March to May 2020. This was later extended by an additional three months up to August 31, 2020.

According to Rohit Poddar, Managing Director, Poddar Housing and Development Ltd. we are facing an unprecedented Global health pandemic crisis which has become an unprecedented global economic crisis. It is not the fault of companies that this situation has arisen and if operations can not be sustained, it is natural for the financial stress to catch up with job losses. Consequently, there will be stress on servicing the EMI on home loans and also meeting their other financial commitments.

Developers are also of the idea that moratorium should be extended to give relief to home buyers with a home loan.

“Under these circumstances, the government could simply extend the moratorium by another 3 months and devolve the powers to restructure loans to the particular lender stating that they are being encouraged to do so. Our government is well appraised of the situation and I am sure will take appropriate steps,” said Poddar.

Another developer, Bhushan Nemlekar, Director, Sumit Woods Limited says, “As there will be time lag to business environment and sentiment to improve and come back to pre-Covid levels, RBI should consider relaxation for housing loan EMI for those who have been affected because of this pandemic.”

According to Shobhit Agarwal, MD & CEO – ANAROCK Capital, the benefit of  moratorium for individual borrower is, it will help both salaried and self-employed borrowers facing difficulties with servicing their car, home and personal loans due to the unique exigencies of the pandemic. It is an opportunity to regain financial clarity. Individual borrowers are also safe from unfavourable action by banks due to non-payment of EMIs, which would otherwise adversely impact their credit score.

The RBI has ensured that availing of this moratorium will not be considered a default for the said period.

Also Read: Group deal of 35 flats for Rs 200 crore in Parel?

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