Tighter project finance rules squeeze real estate lenders

THE PROJECT FINANCING guidelines of the Reserve Bank of India (RBI) for real estate, which became applicable from October 1, have made life difficult for lenders, including NBFCs, banks, housing finance companies and other RBI-regulated entities.

- RAGHAVENDRA KAMATH

The guidelines state that whenever a lender underwrites a project, the debt-to-equity ratio must be maintained at the same level throughout the project’s lifecycle. Lenders cannot extend any top-up loan over and above the originally sanctioned amount, which remains fixed.

Though the RBI wants lenders to maintain financial discipline and prevent develop-

FINANCIAL DISCIPLINE