The use of the force majeure clause would lead to large-scale delays in projects. Worse still, builders in less-affected housing markets would get away without paying any penalty, because the centre has offered a blanket relief.
“Offering this relief to builders in the housing markets in the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR) makes sense, as these cities fall under the contagion hotspots, resulting in construction activity coming to a grinding halt. Even when the lockdown is over and construction activity resumes, the large-scale exodus of migrant workers, would have a heavy bearing on the speed of the work,” says Kishore. Offering a blanket relief to developers across the country may not be a good idea, as construction activity is currently on, in areas that are green zones, Kishore adds.
“As of now, supply chain is the most critical requirement of the industry so that the delivery of materials can be alleviated and business at the construction site can begin immediately. However, the biggest challenge remains in ensuring the availability of labour, when activity resumes. Migration of labour poses a huge concern for the resumption of construction,” adds Nimish Gupta, MD, RICS South Asia.
According to PropTiger DataLabs, as on March 31, 2020, India’s nine prime residential markets had over 16 lakh (16,08,237 in total) housing units in various stages of construction. Of these, nearly 37% units are concentrated in the MMR market, while the NCR market has 19% of this stock.
“The measures announced by the government may take some time to be implemented and this could mean delays for housing projects. The cumulative effect, is that there could be delays in projects of roughly three to six months,” Gupta concludes.