Force Majeure is a provision under RERA to aid developers in case conditions beyond their control hamper the timely delivery of real estate projects. In the current environment, it is essential to analyse whether the COVID-19 outbreak will be deemed a force majeure event or not.
As of May 13, 2020, the Ministry of Finance, taking cognisance of the distressed economic situation of the country, has advised States and Union Territories to treat COVID-19 as a Force Majeure event. This announcement is expected to expedite the recovery of the Indian real estate sector. Ravindra Sudhalkar, Chief Executive Officer, Reliance Home Finance, states, “The Finance Ministry’s advise to treat COVID-19 as an event of ‘Force Majeure’ under Real Estate (Regulation and Development) Act, 2016, will provide significant relief to real estate developers whose projects have been stuck due to lack of liquidity and stoppages in cash flow.” The move to extend the registration and completion date for all registered projects by six months will provide more time to such developers to raise new financing or debt for completing their pending projects. The ease of compliance norms under RERA and other laws is timely and well thought out decision to ease the stress of small developers, especially those into affordable housing, he further added. Speaking on the same, Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani, avers "During the lockdown, the construction industry has nearly come to a standstill thus negating the green shoots that had just begun appearing prior the pandemic came to the fore. The bold economic measures announced today display the government’s strong commitment to tackle the unprecedented challenges and restore confidence and faith in the economy. Providing an extension for completion of projects and treating the coronavirus outbreak as an event of ‘force majeure’ under RERA, brings a significant relief for the sector that has been the backbone of the economy." |
Force Majeure, also known as casus fortuitous in Latin, means ‘unavoidable accident, chance occurrence’. It is a contractual provision in Section 6, Extension of Registration under the Real Estate (Regulation and Development) Act, 2016 (RERA). According to this, the promoter of a real estate project may be granted an extension of registration of the said project for a maximum period of one year, if force Majeure conditions are met.
One of the significant woes of property buyers in India has been the delay in handing over of a project by developers according to the stated timeline. This delay was one of the key reasons behind the introduction of RERA, 2016. The Act binds a promotor to the stated timeline for project delivery and takes strict action in cases of delays in the same. These actions also include the revocation of the concerned project’s registration, as stated in section 7 and 8 of RERA, 2016.
RERA includes the Force Majeure provision to give the promoter additional time to complete a project, over the project delivery date, as stated in the affidavit submitted to the RERA authority while applying for registration. The promoter might need an extension to complete the project, the delivery of which might have been delayed due to reasons beyond control.
Nayan Raheja, Executive Director, Raheja Developers, says, “The RERA authority can approve the extension of registration in cases of Force Majeure such as flood, war, drought, earthquake or any natural calamity, that affects the development of the project. The authority might also extend the registration for one year if it feels the reasons for extension are reasonable.”
What is the aftermath of a Force Majeure event?
Suppose a natural calamity like a flood or war takes place, and this leads to a delay in handing over possession of a realty project. As per the builder-buyer agreement, the buyer has to let the promoter apply for an extension under the concerned Real Estate Regulatory Authority, for giving possession of the apartment. However, in case it is not possible for the project to be completed, the allotment shall be terminated under Force Majeure. The information regarding the termination has to be communicated to the buyer at least 30 days before such a conclusion is reached. The promoter then has to refund the entire amount paid by the buyer, within 45 days from this date of termination.
The promoter will be free of contractual obligations after the full refund of money to the buyer is undertaken, and the buyer cannot have any subsequent claims against the promoter.
Nimish Gupta, MD, RICS, South Asia shares his thoughts on the requirement of contingencies and full preparedness for impending unexpected occurrences in the real estate sector as a consequence of the COVID-19 lockdown and pandemic:
How does Force Majeure play out in times of COVID-19 pandemic?
India’s real estate sector, which was struggling to regain its health amidst a liquidity crisis, has witnessed another blow in the form of the COVID-19 pandemic. The virus has disrupted the functioning of developers, buyers and key stakeholders of the industry.
To curtail the spread of the virus, the Government has put many restrictions, including a nation-wide lockdown. This has led to the complete halt of construction work, shortage of raw materials due to supply chain disruptions, and shortage of workforce.
The economic slowdown coupled with the work-from-home directive has increased uncertainty among buyers as well, on whether they will have adequate cash flow to pay-back their home loans or to make payments to developers for new/current purchases.
As per the Confederation of Real Estate Developers’ Associations of India (CREDAI), the real estate industry has been directly affected since property buyers have reduced means to honour their financial obligations against purchases made. When buyers do not make payments to developers, the latter cannot fulfil their principal and interest payments to banks or provide timely delivery of projects to buyers. Therefore, COVID-19 should be declared as a Force Majeure within Section 6 of RERA. Exemption from penal charges and project completion time should be extended by a year through the extension of project registration.
Lack of clarity regarding the fulfilment of the builder-buyer agreement and demand for ‘Force Majeure’ may open the doors of multiple litigations in the coming future.
Is there a precedent of outbreaks being covered under Force Majeure?
The epidemic outbreaks of Ebola and Severe Acute Respiratory Syndrome (SARS) are two events which have come close to initiating an international crisis as the one COVID-19 has currently caused. Ebola, which was active mostly in regions of West Africa, had led the courts in that region to rule it as a Force Majeure event. Whereas the major impact of SARS was in China and its courts also ruled that such an outbreak triggered a Force Majeure event.
In conclusion, considering that the current viral outbreak has led to a worldwide situation far worse than the one created by Ebola and SARS, it can be cautiously indicated that the COVID-19 may be listed as a Force Majeure event in India. Although, each case will have to be assessed on its own merits and it will be interesting to observe how this acts out in Indian courts of law.
Vishal
Builder is harrassing me for late payment charges from July till October at 2% per month , can I take legal action for the same ?
Because of force majeure they cannot charge me late payment charges?
November 1, 2020 | 11:11 AM
Subhadra Bhadauria
@Vishal
Hi Vishal,
In the light of COVID-19 pandemic, while there were a few relief measures announced for home buyers, however, before you take any legal action against the builder, please contact an experienced lawyer.
November 2, 2020 | 11:21 AM
Punith
Hii I purchased individual house agreement also over advance money also given Katha not there applied to E Katha last 4 month I am waiting fr my Katha can I go for registration without E Katha
October 6, 2020 | 5:14 PM
Allen Victor
@Punith
Hi Punith,
You can go for registration with either E Khata or a physical Khata.
October 8, 2020 | 11:20 AM
Nandkishor Soor
Bought flat in 2016, per agreement I was supposed to get possession by Dec2018.But didn’t get. So late 2018 builder gave us confirmation in email & consent letter that he will pay monthly rent until flat is handed over.So can we get rent in this force majeure also as possession was due in 2018 only?
September 18, 2020 | 6:16 PM
Aman
@Nandkishor Soor
Hello Nandkishor,
Force Majeure is a provision in Section 6, under the Real Estate (Regulation and Development) Act, 2016 (RERA). According to this, the developer of a real estate project may be granted an extension of registration of the said project for a maximum period of one year, if force Majeure conditions are met. COVID-19 activates the said provision.
With Force Majeure in place, developers get an extension for the completion of their ongoing projects. Whether you get your monthly rental or not, it is absolutely dependent on the builder.
September 23, 2020 | 7:04 PM
Nandkishor Soor
@Aman
Moreover suddenly builder asking to pay interest of delayed payment even after paying all installment within a month after receiving demand letter.Until 80% payment they haven’t mentioned interest in any of demand, now suddenly in 9th demand they mentioned interest right from first installment.Guide
September 24, 2020 | 12:42 AM
Allen Victor
@Nandkishor Soor
Hi Nandkishor,
If this is an unfair bid on the builder’s part you should go ahead and seek legal counsel.
October 8, 2020 | 5:44 PM
Harmeet Bindra
@Allen Victor
The possession in your case was due in 2018. The builder cannot take the benefit of pandemic situation in 2018 as this situation arose just few months back. So, you can claim the rent as promised.
September 26, 2020 | 8:48 AM
Nandkishor Soor
@Harmeet Bindra
Correct in my case as the possession was due on Dec-2018 how can builder take the advantage of this pandemic because during this pandemic also I am paying bank interest of Rs. 26k. If he is denying to pay how should I convince him or what action I can take? Please guide. Thanks!
September 28, 2020 | 3:14 PM
Subhadra Bhadauria
@Nandkishor Soor
Hi Nandkishor,
You can file a complaint against the builder under RERA as it is a case of delayed possession. However, do consult a legal expert before initiating the process.
October 5, 2020 | 12:52 PM
DHALI A U
Respected sir I want Give my property for any bank and ATM here is spare for 2000 sqft for first floor and ground floor is space for ATM there is present SBI and bank of India so many gatherring and urgent requirements for any bank for our help please reply.
September 7, 2020 | 12:27 PM
Subhadra Bhadauria
@DHALI A U
Hi Dhalia,
Please reach out to the area-based financial institutions. Since the terms and conditions of ATM installation vary across locations and banks, it would be better to connect with the city-based lending institutions. You can either write to bank officials over mail or arrange a meeting to discuss in detail.
September 7, 2020 | 12:35 PM
Wasim
Mje property bachni hai
August 30, 2020 | 12:55 AM
Subhadra Bhadauria
@Wasim
Hi Wasim,
If you want to sell your property, then you can post an ad on 99acres.com portal – https://www.99acres.com/postproperty/?p1=233&p2=S&p3=0&lstAcn=CP_R&lstAcnId=233. You can advertise here for free.
August 31, 2020 | 12:19 PM
Glancy
Dear Sir, I purchased apt with 4 installments, i paid full 3 installs on time, but now i am unable to pay the 4 installment due to current situation of coronavirus. I requested my builder to give some time as the apt is ready for use but instead builder has charged with penalty on install & GST.help
August 9, 2020 | 12:32 PM
Subhadra Bhadauria
@Glancy
Hi Glancy,
RBI has extended a loan moratorium until August 31, as per which banks have been asked to allow relief to borrowers on payment of instalments in respect of all term loans outstanding as on March 1, 2020. Hence, the builder can not force for the outstanding amount.
August 10, 2020 | 11:04 AM
Glancy
@Subhadra Bhadauria
Thnx Subhadra, I did not take loan from bank. But my agreement with builder was to pay 25% – 4 installs. In which 4th install unable to pay. Flat is ready and builder started charging me penalty on overdue payment. Can they still charge.
August 10, 2020 | 11:31 AM
Subhadra Bhadauria
@Glancy
Hi Glancy,
Given the current scenario, they should not since the Government has declared the pandemic as Force Majeure event. However, it would be better if you consult a legal expert on the matter
August 10, 2020 | 12:58 PM
Y K Agrawal
@Subhadra Bhadauria
Builder cannot charge penality as Govt allowed moratorium. Send the copy of builder letter to RERA for taking action with a copy to ministry of urban development
August 12, 2020 | 12:43 AM
Rajan Kumar
I purchased a commercial shop in GYC Galiliya but they took all amount but the are not providing NOC due to this reason my registry is pending please suggest.
Rajan Kumar
9136069705
July 29, 2020 | 6:38 PM
Allen Victor
@Rajan Kumar
Hi Rajan,
You should consult with the concerned authority for property conversion and registration and accordingly seek legal counsel if need be or file a complaint with the UPRERA.
July 31, 2020 | 10:53 AM
Gurmeet singh pannu
New contrasan 1BHK recorment
July 28, 2020 | 8:17 AM
Anirudh Singh Chauhan
@Gurmeet singh pannu
Hi Gurmeet Singh, if you want to buy/rent a 1 BHK in your area of interest, you can perform a comprehensive search on http://www.99acres.com. Here you will find ample housing options within the desired budget range, location, construction status and with all the details enumerated. Thanks
July 28, 2020 | 4:19 PM
Gurmeet singh pannu
Hi im gurmeet singh pannu 1B H K my recorment koparkherana
July 28, 2020 | 8:14 AM
Anirudh Singh Chauhan
@Gurmeet singh pannu
Hi Gurmeet Singh, if you want to buy/rent a 1 BHK in Kopar Khairane, you can perform a comprehensive search on http://www.99acres.com. Here you will find ample housing options within the desired budget range, location, construction status and with all the details enumerated.Thanks
July 28, 2020 | 1:30 PM
Balram
Advance booking paid for flat on Feb 29 and termsheet signed on March 9. Registration pending. Job lost and HDFC Ltd unwilling to finance. As a buyer what options do I have since I can no longer think of buying this flat.
July 4, 2020 | 10:17 PM
Subhadra Bhadauria
@Balram
Hi Balram,
In case you have a financial crunch, you can probably degrade your flat size. Talk to your builder and check if a smaller configuration flat is available that suits your requirement.However, in case you don’t want to purchase the flat then you can cancel the deal and ask the builder for the refund which would be lesser than the actual booking amount as builders can deduct 10 percent of the booking amount as penalty in case the buyer cancels the deal.
July 6, 2020 | 2:03 PM
Anand Bajpai
As per the registered agreement with the builder,I was to get the possession of a flat in Mumbai by December 2019(excluding 6 month grace period). Since Force Majeure due to Covid19 became effective from 22 March, can the concerned builder still extend the possession without paying interest?
June 27, 2020 | 4:48 PM
Anirudh Singh Chauhan
@Anand Bajpai
Hi Anand, the project deliveries are getting delayed across India due to the Coronavirus outbreak. Even Government and RERA has provided some project deadline extension to the developers facing hardships due to the crisis. We suggest that you wait til the end of this year. If the developer does not give possession by then, you can file a complaint in RERA.Thanks
June 27, 2020 | 4:56 PM
Preet
Do I buy property during covid Or not?
June 2, 2020 | 2:30 PM
Anirudh Singh Chauhan
@Preet
Hi Preet, may I know in which city are you planning to buy a property? Although the decision to buy property is entirely yours, you can wait a couple of months as when the COVID situation improves, the real estate developers would come out with several offers to clear the unsold stock. You might get some additional discounts at that time. Thanks
June 2, 2020 | 4:20 PM
Sanjay
In covid-19, if I intend to cancel a new apartment project booking, can I approach RERA for a full booking amount refund ? Sale agreement not done, partial booking amount paid. (1lac paid from 5lacs booking amount)
Esp. situation around loss of jobs / salaries Etc. Builder adamant to forfeit amt
May 30, 2020 | 11:38 AM
Subhadra Bhadauria
@Sanjay
Hi Sanjay,
As per the RERA norms, in case the buyer revokes the dear, builder can deduct only up to 10 percent of booking amount. He can not forfeit the entire amount. For the full refund of the booking amount, you can talk to the developer and discuss the problem.
June 1, 2020 | 12:57 PM
Aasha
@Subhadra Bhadauria
I hv booked 1 bhk, in september 2019, till nw i did not registered the flat, i have paid 10% of total flat amoun, Builder is pressurising us to register the flat ..n saiying if not then forget ur 10% amount, situation is changed due to covid 19.i wont be able to register,i signed allotmnt letter als
June 4, 2020 | 12:01 PM
Anirudh Singh Chauhan
@Aasha
Hi Aasha, do you want to go ahead with the purchase or not? if it was written in the initial offer letter that your booking amount will be forfeited if you do not register, then the builder can do so. if you do not want to purchase the flat, do not spend more money on registering the flat. By now, only booking amount is lost, if you go ahead with the purchase, the rest of the amount will also be lost. Thanks
June 9, 2020 | 12:24 PM
Ranjit singh
My house 2 room 1 bathroom and kichen. light and water supply is ok
May 14, 2020 | 3:16 PM
Subhadra Bhadauria
@Ranjit singh
Hi Ranjit,
Please elaborate on your query for better assistance.
May 25, 2020 | 10:51 AM
Sekhar Developers
How industry tackle NBFC / HFC illiquidity crisis ?
May 10, 2020 | 8:34 PM
Allen Victor
@Sekhar Developers
Hi,
You can get some information on the same here- https://www.99acres.com/articles/relief-measures-by-the-finance-minister-amid-covid-19-crisis.html
May 28, 2020 | 6:11 PM