Summary Experts say developers should not use the provision to delay rent to buyers in redevelopment projects.
The Maharashtra Real Estate Regulatory Authority (MahaRERA) has declared Covid-19-impacted period from March 15 to September 14, 2020 as force majeure under the provisions of the Real Estate (Regulation and Development) Act. Force Majeure is a clause that provides temporary reprieve to a party from performing its obligations under a contract .
Under RERA provisions, the clause covers natural calamities or acts of God but not a pandemic. The final order invoking force majeure for Covid-19 was promulgated by MahaRERA secretary Vasant Prabhu on Monday in line with the advisory issued by the Ministry of Housing and Urban Affairs (MoHUA). The advisory was part of the Centre’s stimulus package. With 25,000 real projects, MahaRERA has the highest number of real estate ventures registered with it in the country.
The pandemic and nationwide lockdown had triggered a reverse migration of labourers to their home states, breaking the supply chain of construction material, and impacting construction activity across the country. A meeting by Central Advisory Council was held on April 29. The council recommended an extension of registration of real estate projects and the concurrent extension of timelines for all statutory compliance.
The MahaRERA had earlier extended all project and registration timelines by three months from March 15 to June 31. “The Force Majeure period will be treated as a “moratorium period” for the purpose of calculating interest under section 12, 18 19(4) and 19(7) of the Act,” the circular states, adding that the any registration of agreement for sale which becomes due during the six month period can be extended beyond force majeure period. The circular said the possession dates mentioned in a registered agreement for sale shall be deemed to be extended till the force majeure period is over.
The authority said any refund which becomes due during the force majeure period will be allowed to be executed within one month after the force majeure period ends. Similarly, any amounts to be recovered under Section 40 of RERA shall be recovered after the force majeure period is over, the circular said.
Shirish Deshpande, chairperson Mumbai Grahak Panchayat raised concerns about the development. “It is debatable if the benefit of such moratorium can be given to builders of such projects which are already delayed and stuck for a long period,” Deshpande said. “Even after the lockdown, the developer is unable to give possession in near future. In such cases, home buyers cannot be denied interest for lockdown period.”
He said MahaRERA should ensure that builders do not take undue advantage of the lockdown situation. “Homebuyers continue to suffer if they are paying EMIs to their banks or financial institutions. What protection or relief will the RERA offer to them? Similarly, taking undue advantage of the lockdown, many builders have stopped paying rent to the rehabilitation members. MahaRERA must clarify and direct all the developers that there's no immunity or moratorium on their obligation to pay rent to rehab members,” Deshpande said.
Advocate Nilesh Gala questioned how the force majeure provisions can be applicable to Section 12 of RERA. The section pertains to obligations of promoters regarding the veracity of their advertisement or prospectus and asks the developer to refund entire investment made on the basis of false information.
Advocate Naheed Carrimjee said invoking force majeure in the real estate sector was in the interest of both developers and home buyers. "That does not mean that developer should delay rents to tenants in redevelopment projects," Carrimjee said.
Commenting feature is disabled in your country/region.