The beleaguered real estate and construction industry finally got a shot in the arm with the liberal provisions announced by finance minister Nirmala Sitharaman in her first tranche of PM Modi’s ‘Aatma Nirbhar India’ scheme of 20 lakh crore rupees stimulus for the nation’s economy to clamber out of COVID-19 stress
The relief includes permission to treat COVID-19 as an event of ‘force majeure’ under the real estate act, as well as a liberal extension to pending projects. The Housing Ministry will advise all states and union territories and their regulatory authorities to follow this.
As per the original provisions of RERA, failure to complete projects within the timelines would have invited penalties.
Registration and completion date of incomplete projects will now be automatically extended for all registered projects expiring on or after the date of lockdown (25th March). There will be no need for applications. State regulatory authorities can extend this another period of 3 months.
“This will cover construction as well as goods and services contracts,” said the minister, “even the concessional periods will be extended.” The finance minister hoped that these measures will de-stress real estate developers and ensure completion of projection so that homebuyers can hope to get their units within the new timeline.
The real estate industry as well as business chambers welcomed the announcements, calling it a ‘life line’ to India’s realty sector. While ASSOCHAM said the measures announced on Wednesday will make the industry ‘viable’, CII said it will “reduce the compliance burden for enterprises while infusing confidence among entrepreneurs.”
Real estate industry body NAREDCO president Niranjan Hiranandani welcomed the measures to apply ‘act of God clause [Force Majeure]’ to real estate delays and extension of timelines. “Relaxation in project timelines under RERA Act will bring in sigh of relief to the developers. [It] ensures homebuyers trust in the project and grants breather to the developer’s fraternity for coping up with backlogged work due to natural disaster delays.”
Anuj Puri, chairman of leading real estate consultant Anarock, pointed out that the many liquidity schemes announced for NBFCs and HFCs in Wednesday’s package could have a trickle-down effect which will help the real estate sector. “This will ease liquidity woes of stressed players,” Puri said, pointing out how together they contribute more than half of the total lending to real estate in India currently.
However, Hiranandani expressed disappointment at the lack of fiscal stimulus for real estate. “Industry is pegging a big hope on much awaited fiscal relief to be granted to the second largest employment generating sector. Liquidity infusion will be imperative to turn around the depressed scenario of the sector,” he said.
The Force Majeure application, legal experts feel, would have a positive impact beyond helping developers out of the present situation of supply chain disruption and shortage of labour. “The developers will also be able to pass on the benefit to home buyers who are facing pay cut/jobless threats on account of COVID-19,” feels Abhilash Pillai, partner at the law firm Cyril Amarchand Mangaldas.