Impact of Moratorium Period on Real Estate
June 17, 2020
The Reserve Bank of India recently announced a three-month extension of the moratorium period on all term loans, EMIs and other loan repayment installments outstanding till August 31, 2020. The gradual recommencement of the economy post lockdown has left many people clueless about their forthcoming expenses. This moratorium extension is a much-needed step to lift the financial burden off borrowers and provide some temporary relief.
The disruption in cash flow, in some cases complete loss of income, has left many businesses and professionals with huge debts. This loan moratorium policy implemented by banks exempts the payment of EMIs, mortgages and credit card dues, allowing a breathing room of at least 90 days to manage finances.
What is a Moratorium Period?
Simply put, it is a period during which a borrower is not obligated to pay EMIs or loan installments that may be pending. The moratorium period delays the payment of installments to the bank for a stipulated period of time. It is better defined as an EMI-holiday. However, the interest continues to accrue on the outstanding amount of the loan during the moratorium, which shall be payable later.
A moratorium period is common for education and home loan repayments, however, it can now be applicable in all loan installments and EMIs, including credit card dues.
Moratorium Period for Real Estate buyers
In the real estate sector, banks set a fixed moratorium period, a lot like a grace period after the loan has been disbursed, that allows the borrower to pay off his debt (including the interest) at a later stage. Banks allow a moratorium period in special cases, such as when the construction of a property gets delayed, the buyer can choose to pay his monthly fixed mortgage after this grace period that has been pre-decided based on an agreement between the buyer, bank and builder.
Why is the implementation of a Moratorium Period significant in the current scenario?
In order to ease the uncertainty and continue the viable functioning of businesses, the Reserve Bank of India has announced a moratorium period extension of three months until August 31st, following the disruptions caused by COVID-19. The country is currently preparing to resume, and individual expenses and purchases have suffered a major hit.
Those of you who have recently invested in a property, fret not. And, those who are still contemplating their investment choices, there is a ray of hope. This moratorium period is just what you need to save your investment deals without the burden of repaying your EMIs immediately. For many of you who are still deliberating your decision of investing in a property, now is a good time to utilize the EMI-holiday period and find yourself a beautiful, modern home. Take a look at the spacious villas apartments in Chennai by Casagrand and make an informed decision.