Deepak Parekh Backs One-time Loan Restructuring

Housing Development Finance Corp Ltd (HDFC) chairman Deepak Parekh has called for a onetime restructuring of real estate loans to help developers find last mile funding for their projects. In a letter to shareholders in the mortgage financier's annual report for fiscal 2019-20, Parekh called for easier financing, loan restructuring and also end to end approval and disbursment of mortgage loans. "The RBI should permit a one-time restructuring for real estate loans. This has been a long standing request and a measure implemented in the past to revive the sector. Allowing for a restructuring of these loans and categorising them as standard assets will facilitate last mile funding for these projects. It is important to recognise that unlike other loans, the underlying value of the land is always there as security. Further, to repair the sector, real estate prices have to be realistic to reflect current market realities. This would help developers offload their unsold inventory and improve their cashflows. Simultaneously, there is a need for realignment of ready reckoner rates as well," Parekh said. Allowing the problems in the real estate sector to fester, may result in a rise in non-performing loans, which in turn will weaken the overall financial sector, Parekh argued. He also backed the RBI in its stance on allowing interest to be charged on loans under moratorium. "The Reserve Bank of India (RBI) has been at the forefront, shouldering a huge burden to maintain financial stability. The saga of the highest court of law questioning the RBI on the moratorium was indeed unfortunate. Why should a central bank have to be answerable to a court on basic principles which the financial sector operates on? Interest payments on borrowings and loans are contractual obligations. No laws are being violated," Parekh said.