RBI extends recast benefit on commercial real estate loans to NBFCs© firstpost.com

RBI extends recast benefit on commercial real estate loans to NBFCs

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The Reserve Bank of India (RBI) on Friday extended the benefit of restructuring some commercial real estate loans (CRE) to non-bank lenders. As a result of the regulatory move, NBFCs will now be able to restructure loans to real estate projects where the date of commencement of commercial operations (DCCO) has been delayed for reasons beyond the promoter’s control without classifying them as bad loans for another year.

“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,” RBI governor Shaktikanta Das said, adding: “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.”

According to sector experts, NBFCs’ outstanding credit to the commercial real estate stood at Rs 1.29 lakh crore as on September 30, 2019. Restructuring has been one of the prime demands of NBFCs with a significant exposure to real estate. Earlier this week, Housing Development Finance Corporation (HDFC) chairman Deepak Parekh had argued in favour of a one-time restructuring for stressed real estate projects. “That would offer a better way to renegotiate timelines of repayment than the legal complications of triggering force majeure clauses,” Parekh had said.