No Waiver on Compound Interest for Real Estate

The government is unlikely to extend the proposed interest waiver to the real estate sector, which has already benefited from funding support under the Special Window for Affordable and Mid Income Housing or SWAMIH. The Centre will make additional submissions before the Supreme Court on the proposed compound interest relief based on the report of the panel headed by former CAG Rajiv Mehrishi as well as directives stemming from the KV Kamath committee recommendations on loan restructuring, they said. The waiver relates to the six-month loan moratorium that ended August 31 and was aimed at providing relief to borrowers hit by the Covid-19 pandemic. The Centre will provide details of the SWAMIH scheme through which more than ?10,000 crore has been sanctioned to resume construction of houses that had halted. The court had issued notices to the government on a plea filed by the Confederation of Real Estate Developers’ Association of India (CREDAI) and the Association of Power Producers seeking interest relief. The Reserve Bank of India had contended that interest relief would be an additional burden on banks, a view that the government had initially supported. The court then asked the Centre to make clear its own stand on the matter, prompting the establishment of the Mehrishi committee, which suggested the waiver. The government filed an affidavit based on this in the apex court last week, proposing interest on interest waivers for loans up to ?2 crore in eight categories. These include credit to micro, small and medium enterprises as well as education, housing, consumer durable, auto, personal and consumption loans apart from credit card dues. The cost of the compound interest waiver is estimated at ?5,500 crore, which will be borne by the government.