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‘Force Majeure’ Under RERA- A Step To Combat Covid Disruption
Businessworld.in  |  May 21, 2020

Dr Niranjan Hiranandani

Following the economic stimulus announcement of Rs 20 lac crore by Hon’ble PM, we had the Finance minister to announce the first set of booster packages. The announcement was related to the regulatory aspect of extension of dates under RERA by allowing ‘force majeure’ with the Urban Development Ministry issuing advisories to states and UTs to treat the COVID-19 period as an 'Act of God'.

 

The COVID pandemic resulting in lockdown has practically stalled up all the on-going site construction work, bringing projects to the grind halt. More importantly, there is also supply chain disruption which makes procuring of raw materials a challenge as partial relief to restart the pre monsoon work has been granted. Adding to those woes is reverse migration of site labour out of fear and lack of work is a daunting task.

 

The Act of RERA was introduced to bring in the transparency, compliance mechanism and financial discipline safeguarding the interest of homebuyers and developers. It levies strict penalties in case of late project delivery. Given the lockdown where physical movement has been fully stopped, the project's work is likely to push back by a few months to cope up the time lost. Given the scenario, Industry bodies have asked for extension in the due dates/ timelines to accommodate the delay caused due to stoppage of work under natural disaster conditions. Few states have already granted the three month extension on the regulatory aspect in regard to the timelines and deadlines.

 

Industry shall further await for the direction from the Ministry of Housing and Urban Affairs to the states, UT and Regulatory bodies on the specifications granted by invoking force majeure clause in the latest announcement by the Finance minister. The announcement that the Urban Development Ministry would issue advisories to states and UTs to allow ‘force majeure’ by treating the COVID-19 period as an 'Act of God', effectively, provides a major relief to the real estate sector. This will translate into an extension of timelines for project completions and registration by 6 months, effective from 25 March 2020.

 

In terms of actual implementation, fresh project registration certificates can be issued as also, registration and completion dates extended ‘suo moto’ for up to six months. This is indeed a move to combat COVID disruption which practically brought construction work to a grinding halt with additional chaos of migrant labourer’s movement and raw material supply disruption. Relaxation in project timelines under RERA Act will bring in sigh of relief to the developers and safeguard the interest of homebuyers with the revised new timelines for their dream home deliverables. This 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.

 

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.

 

Viewed from a legal perspective, this clause acts as a protection to parties to a contract, in a situation where due to any unforeseen circumstances either of the parties are unable to fulfil their commitment as per the agreed terms and conditions of the contract. In simple words, due to any ‘Acts of God’, such as fire, flood, war, etc., parties are unable to perform their part as it is not reasonably within the control. Now, the COVID-19 pandemic has been added to the list, and timelines/ deadlines not adhered to as a result, will not result in penalties under regulatory laws.