Finance Minister Nirmala Sitharaman’s decision to extend RERA-imposed completion deadlines on real estate projects scheduled to expire on or after March 25, 2020, has been hailed across the real estate sector. Sitharaman said that COVID-19 would be treated as an event that could invoke a Force Majeure clause and that the Urban Development Ministry would issue advisories to states and union territories in this regard.
“Regulators can be flexible with the contract signed,” said Sitharaman, “This can also mean that necessary changes will mean fresh project certificates, and they (the regulator) can extend registration and completion dates by six months, suo moto, for all registered projects up to March 25, 2020.”
‘RERA deadline extension the right move’
NAREDCO President Niranjan Hiranandani said that the very fact that the decision to extend RERA deadlines at the top level would serve to bring about some uniformity in RERA regulations, especially given that some states (Maharashtra, for instance) had already allowed a three-month extension in completion timelines.
“Regulatory requirements under RERA — especially timelines and deadlines — were among major worries for real estate,” said Hiranandani, also the Co-Founder and MD of the Hiranandani Group, “In some states, a three month extension has been declared. For those where this is yet to happen, the announcement that the Urban Development Ministry shall issue advisories to states and UTs to treat the COVID-19 period as an “Act of God” and thus allow Force Majeure, is the right move.”
Some players believe that the move could also help revive the ongoing labour crisis in the construction industry. “This announcement is especially important to construction sites in red zones where construction has not been permitted at all,” said Farshid Cooper, MD, Spenta Corporation, “It remains to be seen how the ongoing labour crisis resolves itself over the next few months as continued shortage of labour could further.”
'Liquidity infusion to NBFcs could benefit the sector'
The government’s decision to infuse Rs 30,000 crore by way of a special liquidity scheme into NBFCs, HFCs and MFIs has also been singled out for praise, although the industry believes more could have been done on the liquidity front.
“The announcement will benefit the real estate sector significantly, given that NBFCs and HFCs are major lenders to it,” said Anuj Puri, Chairman, Anarock Property Consultants, “As per our research, NBFCs and HFCs together contribute almost 56% of total lending to real estate in India currently.”
‘Lack of one-time rollover of loans disappointing’
Developers say that a waiver of or reduction in interest on loans — or better still, a one-time rollover of these loans — would have been ideal.
“There is still the need to address the larger liquidity and cash flows related challenges faced by the developers,” said Ashok Mohanani, Chairman, EKTA World, “It’s also important that the finance minister grants a waiver or reduction in the interest on term-loans and consider a one-time rollover of these loans, so that developers can utilise funds for completion of projects, while repayments can be put on the backburner.”
Motilal Oswal Real Estate Fund agrees. “The finance minister’s announcements do not address the larger liquidity and cash-flow-related challenges faced by the developers,” said the fund’s CEO, Sharad Mittal.