Treat Covid-19 as ‘Force Majeure’ under RERA: Finance Ministry

Treat Covid-19 as 'Force Majeure' under RERA: Finance Ministry Nirmala Sitharaman, Minister of Finance of Corporate Affairs on Wednesday announced that Ministry of Housing and Urban Affairs will issue an dvisory to states and urban territories and their regulatory authorities to extend the registration and completion date suo-moto by six months for all registered projects expiring on or after March 25, 2020 without individual applications.

Adverse impact due to Covid-19 and projects stand the risk of defaulting on RERA timelines. Time lines need to be extended.

The housing ministry will also advise states/union territories and their regulatory authorities to the following effect:

  • Treat Covid-19 as an event of “Force Majeure” under RERA.
  • Regulatory authorities may extend this for another period of upto three months, if needed
  • Issue fresh “project Registration Certificates” automatically with revised timelines
  • Extend timelines for various statuary complianes under RERA concurrently

These measures will de-stress real estate developers and ensure completion of projects so tha the home buyers are able to get delivery of their booked houses with new timelines, Sitharaman said.

“We have been hearing that inspite of a lot of steps which the Reserve bank of India (RBI) took, inspite of all the provisions we made between the July and February 2020 budget, it was felt that the NBFCs were not able to get enough resources, particularly some NBFCs which were not highly rated were facing more difficulties in comparison to the others,” said Sitharaman.

Hence the government has launched a Rs 30,000 crore special liquidity scheme. Under the scheme investment will be made in both primary and secondary market transactions in investment grade debt paper of NBFCs/HFCs and MFIs.”This we expect will have an impact of struggling NBFCs who need money to carry on with business. These debt papers will be fully guaranteed by government of India,” said the finance minister.

The finance ministry also announced Rs 45,000 crore liquidity infusion through a Partial Credit Guarantee Scheme 2.0 for NBFCs. This is an existing scheme and the government has extended its scope.

Existing PCGS scheme will be extended to cover borrowings such as primary issuance of bonds/CPs (liability side of balance sheets) of such entities. Under this AA paper and below, including unrated paper will be included.

“NBFCs, housing finance companies and micro finance insitutions (MFIs) with low credit rating require liquidity to do fresh lendng to MSMEs and individuals,” said Sitharaman.

First 20 per cent of the loss will be borne by the guarantor i.e. government of India.