Crises are challenges, not calamities. One can never be prepared for any calamity.’
As the wise saying goes, the same was the case with all of us when we were badly hit with Covid 19. Though we have come out of the lockdown, still the world is crippled and unable to stand straight without any support. Each one of us was affected in some or the other way. Along with the various companies of the world, real estate, though a very firm company was also paralysed.
TABLE OF CONTENT
1.Resilient Real Estate
2.What does Force Majeure Mean
3.Why Force Majeure
4.God’s Act
5.Force Majeure invoked
6.Appeal of Home Buyers
7.Doctrine of Frustration
8.Force Majeure – A Saviour
1.Resilient Real Estate
Real Estate couldn’t shield itself from the heavy blow of the pandemic, and there came a halt to the construction along with a delay in handing of the projects. The reverse migration of the workers added to their miseries. Interruption in the supply chain fuelled the agonies of the developers. Construction activities had come to a grinding halt. Even after the unlock the construction activities resumed at some of the sites. Most of the sites were still stagnant as a large scale of exodus migrant workers had to return to work. Migration of labour is a huge concern for the recommencement of construction. Ensuring the availability of labour was the main challenge. The disrupted supply chain is another critical requirement. Developers have to find new reliable sources of supply chain. Handing of the projects as per the contracts was impossible.
In this worse situation the developers were frantically hunting for some clause which could give them some relief from the penalty which they would have to pay in case of delay in the projects from the date that is mentioned in the contract. To the delight of the developers, came out the Clause of Force Majeure as a saviour from their contracts.
It is rightly said that ‘Suffering becomes beautiful when anyone bears great calamities with cheerfulness, not through insensibility but through greatness of mind.’ Force Majeure was a savior – a blanket of relief.
‘Persistence and resilience only come from having been given a chance to work through difficult problems.’
And…..Real estate got an opportunity to get back to feet and prove to be resilient.
2.What does Force Majeure Mean
Force Majeure is an event of effect that can neither be anticipated nor controlled. It can be an act of God or human actions that include war, armed conflict, terrorist attack, labour strike etc.
A disaster is regarded as a Force Majeure event based on the below mentioned criterion:
a) It is an unforeseeable event. b) It must be outside the control of either party. c) The contract could not be completed due to the calamity. d) The clause of Force Majeure should have been included when the contract was prepared.
3.Why Force Majeure
Force majeure covers extraordinary circumstances as well as natural calamities. An event can be defined as force majeure when certain conditions are fulfilled which include externality, unpredictability and irresistibility of the event. Construction contracts usually include this clause to protect the parties in the event that a part of the contract cannot be completed due to causes which are not in control of both the parties and could not be avoided by exercise of due care. In these circumstances, Force Majeure comes as a saviour.
4.God’s Act
An act of God is an event for which no party can be accountable. It is an event that is beyond the control of the parties and it relieves one or both the parties from the liability to complete the contract.
5.Force Majeure invoked
Covid 19 is certainly an act of God. Builders had to confront a drastic situation that was out of their control. A long period of lockdown, disruption in the labour supply and difficulty in the movement of material like cement and steel had jeopardized the company. The real estate industry came to a complete standstill during the pandemic. The Ministry of Finance announced a 6 months extension for the registration and completion date for all registered projects which expire on or after March 25, 2020. In this way force majeure was invoked.
The Finance Minister has termed the Coronavirus as a Force Majeure event for the real estate sector and this decision was welcomed by the developers because they felt that only force majeure can act as a saviour. The government has provided a major relief to the real estate sector by invoking the force majeure clause for coronavirus hit real estate.
Government declared the Coronavirus pandemic as Force Majeure. Here are a few highlights of the declaration :
- Covid 19 should be treated as an event of Force Majeure under RERA.
- If needed, Regulatory authorities can extend for another period of three months.
- Fresh ‘Project Registration Certificates’ will be issued automatically with revised timelines.
- Timelines will be extended for various statutory compliances under RERA, concurrently.
These measures will de-stress the real estate sector to some extent and can facilitate the completion of projects, without adding an awful financial load on developers.
6.Appeal of Home Buyers
Home buyers feel that Force Majeure is a clause that proclaims one –sided declaration and does not benefit them in any ways. They feel that the legal relationships have to be equally liable to both the parties. They expect equal leeway in the market. They wish to get some legal protection under the Doctrine of Frustration of Contract.
With salary cuts and job losses, home buyers may find it unbearable to pay both the EMI and the rent. They expect the EMIs to be deferred by a tenure equal to the force Majeure period, without any burden of added interest. They should also be allowed to take an exit from the contract without any penalty in case they are unable to bear the home loan.
7.Doctrine of Frustration
Doctrine of Frustration is an event that prevents the completion of performance of a contract and ends in frustration or end of the said contract.
8.Force Majeure – A Saviour
Real estate got a breather when the Finance Minister disclosed about Rs. 20 lac crore Coronavirus stimulus package. The Finance Minister also invoked Force Majeure and the real estate was also permitted to mention the ‘force majeure’ clause as a legal justification for delays in project deliveries. Force majeure comes as a saviour when an unexpected circumstance prevents somebody from doing something that is written in contract. Force Majeure can be invoked in case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature that has affected the regular development of the real estate project.
The Finance Minister directed RERA to consider the entire duration of the Covid 19 pandemic in India as a Force Majeure event. In this way Force Majeure was invoked and came as a Saviour to the pandemic hit real estate. This saved the real estate from paying up to 10% of their entire project cost as penalty to RERA for not meeting the deadlines which were fixed at the time of the registration of the project. The developers got some relief under the Prime Minister’s economic package. No doubt Force Majeure is a deserving proposition. With the extension of the Force Majeure, the developers do not gain anything but the best part is they do not lose either.
‘Even the darkest night will end and the sun will rise.’ How true is this!! 
Written by Nikhil Gattu
