Relaxation in project completion timelines to provide relief to developers, safeguard interests of homebuyers

Published: May 23, 2020 1:23:24 PM

The COVID pandemic has brought all on-going site construction work at projects to a grinding halt. The supply chain disruption will make procuring of raw materials a challenge, and adding to these woes is reverse migration of site labour out of fear and lack of work.

real estate, COVID pandemic, lockdown, RERA, homebuyers, real estate in India, migration of labourThe announcement effectively provides a major relief to real estate and is a positive move to combat the COVID-19 disruption.

The COVID-19 pandemic has impacted the economy; real estate is among the industries which has borne the impact of the lockdown. The biggest aspect of worrying about the industry was about adherence to statutory aspects like meeting deadlines under the regulatory regime. The authorities have stepped in, and there have been a slew of announcements relating to various statutory compliances, which reduce the pressures of deadlines.

The Prime Minister stressed on a ‘self-reliant India’, and the Finance Minister announced five tranches of the economic stimulus package. In the first tranche, the Finance Minister made the announcement on extension of registration and completion dates of projects ‘suo moto’ by six months for all registered projects expiring on or after March 25, without individual application.

Further, the Ministry of Housing and Urban Affairs advised States/Union Territories and their regulatory authorities to treat COVID-19 as ‘an event of force majeure under RERA, the COVID-19 period over six months to be taken as an ‘Act of God’. The regulatory authorities can extend this as required for further three months and a fresh ‘Project Registration Certificate’ can be issued with revised timelines.

To understand the importance of this announcement, consider that Indian real estate has undergone a transformation with the implementation of the real Estate Regulation and Development Act (RERA). The new paradigm brings in two major aspects to Indian real estate: transparency and accountability. The norms bring in strict adherence to timelines and meeting of deadlines relating to statutory compliances. In case of default, there are provisions for levying of penalties on the real estate developer.

The past few years have seen last-mile funding issues along with challenges relating to the liquidity crunch resulting in some projects getting stalled and delayed. The industry, through bodies like NAREDCO, has been in conversation with the authorities to meet the challenges and there has been some positive movement, but the larger problem under RERA relates to penalties on statutory compliances. While these were being dealt with, COVID-19 resulted in the lockdown. Across construction sites, pan-India, work came to an abrupt halt.

In this scenario, adherence to the deadlines is difficult; even after the lockdown gets lifted, it will take some time before activity in real estate returns to normalcy. In this situation, the regulatory aspect was worrying about the industry.

The COVID pandemic has brought all on-going site construction work at projects to a grinding halt. The supply chain disruption will make procuring of raw materials a challenge, and adding to these woes is reverse migration of site labour out of fear and lack of work.

RERA brought in transparency, compliance mechanism, and financial discipline, effectively safeguarding the interests of homebuyers and developers. It levies strict penalties in case of late project delivery. Given the lockdown, project timelines needed to be extended by a few months to cope with the time lost.

The announcement effectively provides a major relief to real estate and is a positive move to combat the COVID-19 disruption. Relaxation in project timelines under RERA brings in relief to the developers while safeguarding the interests of homebuyers, with revised new timelines for their dream home deliverables. This ensures homebuyers’ trust in the project, and grants a breather to the developer fraternity, enabling the process of coping with the backlog of work due to natural disaster-caused delays.

(By Dr. Niranjan Hiranandani,National President, NAREDCO)

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