The Real Estate (Regulation and Development) Act, 2016 under COVID 19
The World Health Organization has declared COVID-19 a pandemic on 11th March 2020. For real estate promoters, in addition to the contractual obligations and their allottees, there are certain statutory obligations imposed by the Real Estate (Regulation and Development) Act, 2016 which are overseen by the Real Estate Regulatory Authority of each state.
Most of the states have established their own RERA offices where they work under the established rules and regulations. Though the act is not retrospective in nature, it mandates every project to be registered with the respective State RERA offices by the promoters of the company within 3 months of the commencement of the Act.
Effect of COVID- 19 on Registration of Real Estate
Under RERA, at the time of making an application for registration, a promoter is required to declare to the respective state authority establish under RERA, the period within which the real estate project is to be completed by the promoter. According to the certificate of registration of the real estate project is valid for the period applied for.
Section 6 of RERA, 2016 empowers RERA authorities to grant an extension for the registration period in certain circumstances. Such as in the event of a force majeure event or, on a account of a reasonable circumstances not attributed to a default on part of the promoter.
The term ‘Force majeure’ has been defined in section 6 of the RERA, 2016, stating ‘a case of war, flood, drought, fire, cyclone, earthquake, or any other calamities caused by the nature effecting the regular development of the real estate project’.
For example, the Force Majeure clause in the Model Agreement to Sale as prescribed under Rule 9 (1) of the Gujarat Real Estate (Regulation and Development) has been stated as:
Provided that the Promoter shall be entitled to reasonable extension of time for giving delivery of Apartment on the aforesaid date, if the completion of building in which the Apartment is to be situated is delayed on account of –
- war, civil commotion or act of God ;
- any notice, order, rule, notification of the Government and/or other public or competent authority/court.
Impact of COVID 19 on RERA, 2016
The impact affecting the closure of construction activity through Government Orders due to COVID- 19 may be for a limited period of 21 days or more if extended, however the ability of a promoter to execute the project will be impaired for a greater period of time. Bottlenecks in supply of essential building construction materials and project specific engineered items are expected to be removed over a longer period of time considering shut down of factories and workshops.
Migrant labor force which forms a major part of labor force in construction industry may also not return immediately. The normalcy in construction industry, based on current estimates by promoter groups is expected to return in 3 to 6 months.
A promoter of real estate projects, hence in order to invoke the Force Majeure conditions has to undertake the following steps:
- Provide notice to the allottees as soon as being aware of the force majeure event happening.
- Demonstrate the impact of the COVID-19 upon the project and how it has directly impacted ability to perform the obligations including quantifying the time extension that shall be required.
- Apply for extension of time with the State Real Estate Regulatory Authority under Force Majeure conditions.
Legal Cases under the effect of Force Majeure and Pandemic events
- Supreme Court of India in Satyabrata v. Mugneeram expounded that the Doctrine of Force Majeure was based on the impossibility of performance of Contract. SC Bench stated that the Section 56 of the Indian Contract Act laid down the positive law and thus does not leave the matter to be determined according to the intention of the parties.
- Supreme Court of India in Energy Watchdog v. Central Electricity Regulatory Commission enunciated that, “in so far as a force majeure event occurs de hors the contract, it is dealt with by rule of positive law under the Section 56 of Indian Contract Act. The Performance of an Act may not be literally impossible, but it may be impracticable and useless from point of view of the object and purpose of the parties”.
Classification of states and their measures taken on RERA, 2016 due to COVID-19
- Maharashtra– In order to aid the government efforts in controlling the damage of COVID-19 and ensure that completion of MAHARERA registered projects does not get adversely affected, the MAHARERA by its order dated 2nd April 2020 decided that all registered projects where completion date, revised completion date or extended completion date expires on or after 15th March 2020, the period of validity for registration of such projects shall be extended by three months.
- Uttar Pradesh– The Uttar Pradesh Real Estate Regulatory Authority has issued a press release dated 14th April 2020 communicating its decision of extending by three months the date of completion of the projects which have its date of completion between 15th March 2020 and 31st December 2020.
- Gujarat– The Gujarat Real Estate Authority has permitted promoters of projects having their project end dates between 1st April 2020 and 31st March 2021, to apply for a one time extension of their project end dates. The application fee for such registration extension due to the COVID-19 outbreak has also been waived.
- Tamil Nadu- By its circular dated 6th April 2020, the Tamil Nadu Real Estate Regulatory Authority has extended the completion period (and as such the validity of registration) of all registered projects by five months. The time limits of all statutory compliance due in March-June 2020 have also been extended to September 2020.
About the Author – Aditya Pratap
Aditya Pratap is a lawyer practising in Mumbai. He argues cases in the Bombay High Court, Sessions and Magistrate Courts, along with appearances before RERA, NCLT and the Family Court. For further information one may visit his website adityapratap.in or view his YouTube Channel to see his interviews. Questions can be emailed to him at firstname.lastname@example.org.
Cases argued by Aditya Pratap can be viewed here.