When the country was enveloped by the Covid-19 pandemic, the Real Estate sector like many other sectors came to a complete standstill. With the central government imposing a nationwide lockdown, the builders were forced to shut their project sites. Site visits were not permitted and construction activities too came to a total halt. The Indian Real Estate sector which was in the process of coming to terms with the various reforms brought by demonetization, GST, RERA etc. due to the lockdown it faced another major setback slowing down its growth momentum.
While it has been common for builders and developers to delay the projects and keep extending their timelines, due to the lockdown, it was inevitable that the ongoing projects would get further delayed. In order to aid the Real Estate sector during the lockdown, the central government and other regulatory bodies took steps to pacify the situation. Important notifications and guidelines were issued by different authorities including the MahaRERA from time to time and SEBI and the RBI also endeavored to provide some relief to the citizens during the upheaval.
The MahaRERA extended the validity period for registration of Real Estate projects, the completion dates or extended completion dates and also relaxed the time limits for statutory compliances from time to time to enable the developers /builders to cope up with the shutdown crisis. The alarming surge in the number of covid -19 cases made it difficult for the builders/ developers to adhere to the terms and conditions/ stipulations embodied / incorporated in the agreements entered into by them with the respective purchasers/ buyers etc.
The Supreme Court of India acknowledged the Covid period as a ‘Force Majeure’ which gave a great relief to the developers/builders who were paralyzed from fulfilling their obligations and/or promises and were unable to handover the possession to the flat purchasers on the date mentioned in their Agreements. The term ‘force majeure’ has been defined in the Black’s Law Dictionary as ‘an event or effect that can be neither anticipated nor controlled.’ Some examples of force majeure events can be any kind of natural disasters like flood, earthquakes, quarantine, war etc.
The measures taken by various government authorities and other regulatory bodies provided support to the real estate market to sustain during the crisis. The Real Estate sector is largely dependent on various other industries to function. However, due to the mandated lockdown, the industries on which the Real Estate sector relies upon were not functioning. The pandemic accompanied with the lockdown and restrictions on travel led to a disruption in the supply chain of raw materials. The country also witnessed the plight of migrant workers returning back to their homes due to no source of income.
The sector was already going through a major turbulence due to the subdued demand and liquidity crisis, policy reforms and structural changes but the outbreak of the coronavirus followed by the mandatory lockdown, battered numerous industries all across the globe, including the real estate sector which was placed in dire straits.
Responsible central and state governments adopted various measures to lift up an economy witnessing a severe downfall. Real Estate sector was adversely hit by the imposition of the lockdown and its recovery was largely dependent upon the steps which the government would take post the end of the pandemic for simmering the situation and regaining continuity in the business. The Indian Real Estate sector has been a significant contributor to the economic growth but however, the rampant spread of the coronavirus coupled with the mandated lockdown triggered an atmosphere of uncertainty, fear and panic leading to a delay in completion of projects and suspension of new launches.
The threat of the contagion led to a stoppage of different businesses all across the globe, the real estate sector being no exception and was the most affected amongst all sectors. The investors kept a watchful eye, hoping that the customers would gear up towards a better future for reviving the Real Estate market, combating the catastrophe which had gripped the country.
The banks and various other financial institutions during the pandemic displayed reluctance to extend loans/financial aids to its customers as job security loomed over their customers which in turn compelled them to cancel the agreements entered into by them with the developers/builders. However, now as the economy has endeavored to restore a semblance of normalcy, the customers are regaining confidence with respect to job security and so we can conclude that the Real Estate sector in the post pandemic world is attaining stability to some extent and we are likely to see resurgence and reshaping of the industry in the near future.
Realty sector battles the economic slump emerged due to Covid -19 and navigates its way to stabilize in the market by taking necessary steps and measures pivotal for its survival and sustainability once again.
The article is authored by Nirali Deepak Parekh. She is real estate lawyer working with Damji Shamji Shah Group, Mumbai.