In a relief to the real estate industry, Finance Minister Nirmala Sitharaman on Wednesday announced that the Urban Development Ministry will give a directive to state regulators to allow extension of up to six months for the completion or registration date of projects which were set to expire on or after March 25, 2020.
The FM also announced a Rs 30,000-crore special liquidity scheme, in which the government will fully guarantee investments in investment grade debt paper of non-banking financial institutions, housing finance companies and microfinance institutions.
The FM said, “Treat COVID-19 as an event of ‘Force Majeure’ under RERA. Extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25th March, 2020 without individual applications.”
Industry insiders say that the six month grace in compliance of norms under Real Estate Regulation and Development Act, is expected to provide some relief to almost 40,000 projects across the country. “There are around 45,000 RERA registered projects and almost 90 per cent of them are ongoing and have a completion date after March 2020. So, all of them can extend their completion date by six months without having to pay any delay penalty to the customer,” said Pankaj Kapoor, founder and MD, Liases Foras.
He further added that this is no significant relief for developers and the government should have provided for demand revival and financing for real estate companies.
There are some who feel this will provide a big relief. Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure Limited said, “We welcome the Government’s decision to treat the COVID-19 period as an event of force majeure to extend the registration and completion date by 6 months for all registered real estate projects. This will certainly alleviate a great amount of stress on the developers and also help homebuyers get their dream homes in the stipulated amount of time.”While the FM also announced the special liquidity scheme, “Under the scheme investment will be made…in both debt paper of NBFCs HFC and micro finance institutions,” said Sitharaman noting that NBFCs with lower credit ratings were finding it difficult to get liquidity.
Sitharaman also announced a partial credit guarantee scheme for investments of Rs 45,000 crore for investment guaranteeing the first 20% loss from such investments.
“The problem was that despite the RBI reducing repo and reverse repo rates, I think there was limited on lending by banks to HFCs and even NBFCs” said Arindam Guha, partner at Deloitte India.
Guha also said that the announcement of a “standstill period” of six months would help real estate companies avoid individual negotiations with state regulators for each project because of COVID-19 related delays.
“In the absence of such a provision, the issue (delay in construction) would have to be dealt with on a case by case basis with each state’s real estate regulatory authority,” said Guha.
He added while this was only a directive, most state authorities would likely extend timelines for project completion and registration in the current circumstances.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines