Extension of the timeline under RERA – COVID-19

Extension of the timeline under RERA – COVID-19

In the year 2017, the real estate sector has been brought under RERA regulations. Under RERA regulations, the individual states and union territories are allowed to build their own rules, under the broad framework placed out by the Centre.

As one of the significant reliefs to the real estate sector, amidst COVID-19, the Finance Minister recently announced COVID-19 to be treated as ‘Force Majeure’ event and accordingly extend the timeline for completion of the real estate project by a period of six months.

After the Finance Minister’s announcement, the Ministry of Housing and Urban Affairs issued an advisory, which is taken up and explained in the present article.

Analyzing the RERA advisory on extension

The Ministry of Housing and Urban Affairs issued an advisory on 13th May 2020 to the State Governments. The advisory clarifies to treat the COVID-19 pandemic as an event of ‘Force Majeure’ in terms of section 6 of the Real Estate (Regulation and Development) Act, 2016.

In order to protect the interest of all the stakeholders, the advisory issued by the RERA authorities permits the regulatory authorities of the states and the union territories to issue the following orders or directions-

  1. To extend the registration/ completion date, automatically, by six months on account of the COVID-19 outbreak by applying Force Majeure provisions under RERA.
  2. Based on the situation of the respective states and reasons to be recorded in writing, the regulatory authorities can consider an extension of the timeline for a further period of three months.
  3. The regulatory authorities may issue new Registration Certificates, mentioning the extended/ revised timelines, to applicable registered real estate projects.
  4. Concurrently, the timeline for all the statutory compliance relating to provisions RERA may be extended.

Unless otherwise prescribed by the respective regulatory authority of state/ union territory, it should be noted here that the advisory is applicable for the registered projects for which completion/ revised/ extended date as per the registration expires on or after 25th March 2020.

The release of the advisory by the RERA authority would importantly avoid the multiplicity of application from the promoters/ developers of various real estate projects requesting to grant the extension of the timeline.

Post RERA authority’s advisory, the Rajasthan Real Estate Regulatory Authority issued an order announcing as under-

  • Extension of twelve months has been provided to the real estate projects.
  • The extension is available to all the projects registered before 19th March 2020.

Before RERA advisory, the regulatory authorities in Maharashtra, Gujarat, Tamil Nadu, and Gujarat have already given an extension of three to six months for completion of the projects. However, it would interesting to observe their action post RERA advisory, which is still pending.

Analyzing the effect of extension on developers

COVID-19 and the subsequent lockdown have adversely affected the real estate sectors. The recent announcement, followed by the RERA advisory, will prove to be a great sigh of relief to the developers as no cases can be registered against them for the extended period, nor will they be accountable to pay any penalty to the regulatory authority or the buyers.

With regard to the advisory, the following are the essential points which the developers need to keep in mind-

  • The extension is available by default, and the developers are not required to make an application for claiming the extension.
  • The regulatory authority of the respective state will issue a fresh registration certificate with a revised timeline for applicable projects. Concurrently, all the statutory compliance timelines will get extended.
  • If the developer requires any further extension (other than the default extension), the developer will have to apply for the same under section 6 of the Act.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.