New Delhi, March 19 2020: CREDAI compliments Government of India for timely and effective measures to contain the spread of COVID 19. The alacrity of the Government response has succeeded in limiting the Corona cases to less than 150 in a population of more than 130 crore.
The loss of lives across the world and the ensuing paranoia in the public along with the social distancing measures is a shell shock to the economy. Airline, travel, hospitality and exports are all reeling under the shock. Loss of jobs and livelihoods is causing misery to millions.
The real estate industry is directly impacted as customers have no means to meet their obligations against home purchases. Malls, multiplexes, restaurants, clubs etc. are lying deserted all over the country with imminent default in their rent payments. Work from home precaution has caused employees to flee their offices. When the real estate industry does not receive its payments from the customers, there is no way it can honour its obligations of interest and principal or meet the deadline to the customer as regards delivery.
In this context, CREDAI has taken account of the COVID impact. We have also studied the measures adopted by the Governments all over the world to cushion the impact of COVID 19 shock to the economy. The real estate sector contributes to 10% of the national GDP and is the 2nd largest employer in the country. Hence, it is of utmost urgency that interest rate on all real estate project loans is re-fixed at the repo rate on which banks borrow from RBI. Principal repayments for real estate projects falling due over the next three months be put off and recovered in instalments over the ensuing 12 months. On behalf of developers, CREDAI assures the Government that the relief will be passed on in its entirely to the customers.
- About Rs. 1 lakh crore is lying in BOCW Cess Fund collected from developers. It should be used to provide loss of wages and healthcare benefits to construction workers.
- As cash flows are affected because buyers cannot fulfil commitments due to the financial meltdown, additional funds from financial institutions are needed to meet increased costs on the same terms as existing loans and without additional collaterals.
- Declaring COVID-19 as ‘force majeure’ under Section 6 of RERA
The ‘force majeure’ provision provides that registration granted to promoters may be extended. Therefore, project completion time and exemption from penal charges should be extended by a year.
- In view of there being no cash inflow for real estate, Special Mention Assets classification adopted by RBI for delayed payments should be kept in abeyance or amended so that delays in repayments are not to be reported for the first 90 days.
- Malls, multiplexes, spas, gyms, clubs & IT Parks etc. are unable to meet their lease rent obligations and many of them are shutting shop, leading to the lay-off of their workers. Hence, to prevent these businesses from down under, benefits under their insurance cover may be allowed by treating COVID 19 as force majeure.