Real estate developers reeling under liquidity crisis and the financial impact of coronavirus outbreak seek to make COVID-19 a part of the force majeure provision under Section 6 of RERA and extend registration granted to promoters by a year.
“As cash flows are affected because buyers cannot fulfil commitments due to the financial meltdown, additional funds from financial institutions are needed to meet increased costs on the same terms as existing loans and without additional collaterals,” developers’ body Credai said in a statement.
The force majeure provision under RERA provides that registration granted to promoters may be extended. Therefore, project completion time and exemption from penal charges should be extended by a year, it said.
Force majeure clause in RERA lays down the unforeseen circumstances under which a builder may not fulfill conditions as per the contract signed with the homebuyers. RERA states the circumstances of force majeure such as war, flood, drought, fire, cyclone, earthquake or any other natural calamity.
"In view of there being no cash inflow for real estate, Special Mention Assets classification adopted by the RBI for delayed payments should be kept in abeyance or amended so that delays in repayments are not to be reported for the first 90 days," Credai has proposed.
Frequently Asked Questions
A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.
There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.
Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.
The group also said that the real estate industry is directly impacted by the coronavirus outbreak as customers have no means to meet their obligations against home purchases. Malls, multiplexes, restaurants and clubs are deserted and default on rent payments is imminent.
“If the real estate industry does not receive payments from the customers, there is no way it can honour its obligations of interest and principal or meet delivery deadlines promised to customers,” it noted.
“Loans by real estate developers should also not be classified as NPA in case they default on interest or principal repayment due to COVID-19,” the builders said.
The real estate sector contributes to 10 percent of the national GDP and is the second-largest employer in the country. Hence, it is of utmost urgency that interest rate on all real estate project loans be reviewed at the repo rate on which banks borrow from the RBI.Principal repayments for real estate projects due over the next three months be put off and recovered in installments over the next 12 months, it stated.