Covid-19 Economic Package: Real Estate Projects Under RERA To Get Six-Month Extension

All real estate projects registered under the Real Estate Regulatory Authority expiring on or after March 25 will get a six-month extension as the lockdown to contain the Covid-19 pandemic stalled work.

Because of the virus outbreak, projects stand the risk of defaulting on RERA timelines, Finance Minister Nirmala Sitharaman said while announcing details of the Covid-19 economic package announced by Prime Minister Narendra Modi. The timelines need to be extended, she said.

The Ministry of Housing and Urban Affairs will advise states and union territories and their regulatory authorities to:

• Treat Covid-19 as ‘force majeure’ under RERA.
• Extend the registration and completion date, suo motu, by six months for all registered projects expiring on or after March 25 without individual applications.
• Regulators may extend this for up to three months more, if needed
• Issue fresh ‘project registration certificates’ automatically with revised timelines.
• Extend timelines for various statuary compliances under RERA concurrently.

These measures will de-stress real estate developers and ensure completion of projects so that homebuyers are able to get delivery of booked houses with new timelines, Sitharaman said.

Developers were demanding an extension in RERA deadlines and inclusion of Covid-19 in the force majeure clause. Housing authorities in Maharashtra have already granted a three-month extension.

Niranjan Hiranandani, president of developers’ lobby Naredco, said the lockdown caused schedules of real estate projects to go haywire and this relief comes at the right time.

Pankaj Kapoor, managing director at Liases Foras, however, said the measures announced by the finance ministry will not be enough to revive the industry. There is nothing that would revive the demand for reality sector, he said, adding that the government has just extended the possession date by six months and that wouldn’t solve any problem for developers.

According to Sharad Mittal, chief executive officer at Motilal Oswal Real Estate Fund, considering that projects are likely to be delayed by at least four to six months, extension will help. But it does not address the larger liquidity and cash flow-related challenges faced by developers, he said.

The government also announced liquidity support to non-bank lenders by providing partial or full guarantees worth Rs 75,000 crore on investment in debt securities issued by such these firms to help them raise money. The non-banking financial companies, the biggest lenders to real estate sector, have seen bad loans rise and were struggling to raise capital.

Anuj Puri, chairman at Anarock Property Consultants, said the Rs 30,000 crore fully guaranteed special liquidity scheme for non-bank, housing finance and microfinance companies will ease liquidity woes of developers as NBFCs contribute almost 56 percent of total loans to real estate.

Hiranandani and Ram Raheja, director of S Raheja Realty, agreed that the liquidity support will ultimately help stressed real estate companies.

Kapoor of Liases Foras, however, doesn’t think that increased capital in the hands of non-banks will ensure money for the realty sector which is grappling with rising bad loans and falling demand. Lenders would be cautious as total commercial real estate lending is already around Rs 6 lakh crore, he said.

Also Read: India Offers Soft Loans, Tax Concessions to Rescue Economy

Jaxay Shah, chairman at developer lobby Credai-National, said the industry is hopeful that the finance minister will soon announce other necessary measures. These, according to Shah, include infusion of liquidity, de-cartelisation of cement prices, restoration of supply chain to ease construction on the project sites and boost demand by increasing tax deduction limits for interest on home loans.