The Reserve Bank of India(RBI) has ruled out restructuring of bad real estate loans which may increase
non-performing assets of banks, but bring down prices of homes as developers
sell off properties to pay lenders. The banks were seeking permission to
continue classifying some bad real estate loans as standard assets even after
developers failed to pay. One more restructuring would rather be a boon for developers to hold on to prices and profit. Banks are wary of the risk
associated with commercial real estate because demand for commercial space such
as malls has come down and there is a decline in demand in the residential sector. This problem cannot be solved by repeated restructuring of loans, but
by reviving the market by lowering the price, making property more affordable
and showing the customer some economic value in their purchases, it is
observed.
The RBI allowed banks to
restructure loans to both manufacturers and developers and continue showing bad loans as standard assets to save banks and developers from financial strain
after the collapse of Lehman Brothers in 2008. That was for only those loans
where the borrower was regular in repaying dues until September 1, 2008 and
where the bank was able to restructure it by March 31, 2009.
While this helped banks and developers, consumers were at the receiving end since real estate companies
held on to properties at high prices as they were not obliged to pay
immediately. The subsequent pickup in economic activity pushed up all asset
prices, including real estate, to levels almost close to those prevailing
before the credit crisis. It is observed that there are signs that high levels
of global liquidity are contributing to rising asset prices. The total outstanding loans of banks to the real estate sector stood at Rs 88,581 crore as of November 2009, according to RBI data.
No comments:
Post a Comment