In a major relief for the real estate developers, the government on Wednesday, May 13, said the Union Ministry for Housing and Urban Affairs will issue advisory to states and union territories to declare the Covid-19 situation as a 'force majeure' under the Real Estate (Regulation and Development) Act.
Addressing a press conference today, Finance Minister Nirmala Sitharaman said it will advise state governments and Union Territories to extend the timelines of RERA projects by six months in order to provide some relief to the real estate sector.
Sitharaman said due to the adverse impact of the coronavirus pandemic and the nationwide lockdown, real estate projects stand the risk of defaulting on RERA timelines.
With the move, the government has allowed suo-moto extension of the registration and completion date by six months for all registered project expiring on or after March 25, 2020 without individual applications.
She said that regulatory authorities may extend this for another period of upto three months, if needed.
Further, the fresh project registration certificates will be issued automatically with revised timelines. The Centre has also directed the extension of timelines for various statutory compliances under RERA concurrently.
As per the government, these measures will de-stress real estate developers and ensure completion of projects so that home buyers are able to get delivery of their booked houses with new timelines.
The announcement is part of the Rs 20 lakh crore economic package announced by Prime Minister Narendra Modi on Tuesday evening.
FM throws lifelines to real estate: Anuj Puri
Today's announcement is much in line with the government's aim to spur economic growth and build a 'self-reliant' India. In the first of the series of announcements the FM will make over the next few days, the real estate sector, NBFCS/HFCs and MSMEs got a major boost on day one, says Anuj Puri, Chairman – ANAROCK Property Consultants.
Providing major relief to real estate developers, the government has extended the timeline for project completion and registration by 6 months. This is a big move that will destress developers significantly since construction activity had been halted all across the country. Homebuyers' wait for their homes will get extended by this move, but this was in any case inevitable.
Further, the announcement of INR 30,000 crore special liquidity scheme for NBFCs/HFCs and MFIs will ease liquidity woes of stressed players. This will benefit the real estate sector significantly, given that NBFCs and HFCs are major lenders to it. As per ANAROCK research, NBFCs and HFCs together contribute almost 56% of total lending to real estate in India currently.
In another major move to revive the MSMEs, the FM tweaked the definition of such companies to provide benefits to many more units. The collateral-free automatic loan for MSMEs worth INR 3 lakh crores will give a lifeline to nearly 45 lakh units for four years. With this, the government aims to curtail job losses, and this could indirectly benefit affordable housing. Fear of job losses may have caused many potential affordable home buyers to defer their purchase decisions.