Home >News >India >RBI Policy: Eases norms to give relief to commercial real estate developers
The real estate sector has been struggling because of tepid demand amid liquidity crunch. Photo: Bloomberg
The real estate sector has been struggling because of tepid demand amid liquidity crunch. Photo: Bloomberg

RBI Policy: Eases norms to give relief to commercial real estate developers

  • RBI decision is in line with government’s efforts to pull the sector out of crisis
  • It will help developers focus on completing projects and will ease banks' worry about projects turning into non-performing assets

New Delhi: The Reserve Bank of India on Thursday allowed by another year the extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters. This will provide comfort to companies developing such projects and also their lenders. The banks will also not need to downgrade the asset classification.

The central bank will issue detailed instructions shortly.

The RBI's decision is in line with the government’s efforts to pull the sector out of the morass that it currently finds itself in.

“It has been decided to permit extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters, by another one year without downgrading the asset classification, in line with treatment accorded to other project loans for non-infrastructure sector," RBI said in a release on ‘Statement on Developmental and Regulatory Policies’.

The RBI's move will for now help developers focus on completing projects and will ease banks' worry about projects turning into non-performing assets.

Last month, the National Company Law Tribunal ruled that a real-estate developer could not be charged with committing a ‘default’ under the Insolvency & Bankruptcy Code, 2016 (IBC) when the possession of a premise is delayed for reasons beyond its control.

The RBI statement on the commercial real estate sector was issued along with the bank’s sixth bi-monthly monetary policy statement of fiscal 2019-20 of the Monetary Policy Committee. The central bank today decided to keep its lending rates unchanged, as was widely expected, at 5.15%.

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