In our Blog Part-3: Impact of Covid-19 on Indian Real Estate Transaction, we have covered the effect of Covid 19 crisis on the real estate sectors such as in housing, hospitality, retail and commercial and its legal implications. Here, we have highlighted some of the relief measures given to real estate sector.

The Indian real estate sector especially the residential segment has already been struggling with project delays, regulatory changes and low sales for the last years. The quantum of impact will depend on how long the lockdown will last and how long the economy will get back on track. Considering the difficult times, the real estate sector undergoing on account of Covid 19, certain relaxations have been provided:

  1. IBC threshold limit increased:

The Ministry of Corporate Affairs vide its Notification dated March 24, 2020 has increased the threshold limit of defaulting companies from Rs. 1 lakh to Rs. 1 crore. Earlier creditors had the right to file a case as specified under Section 4 of the Insolvency and Bankruptcy Code (IBC), if a company defaulted on payment of at least Rs.1 lakh.

Its impact on Real Estate: After the home buyers were given the status of financial creditors under IBC (Second Amendment) Act 2018, many insolvency proceedings were initiated against defaulting Promoters under section 7 of the IBC. However, in several of such cases, projects which were close to successful completion have been dragged into insolvency. To combat such challenges, the government brought another amendment in 2019, wherein it introduced a minimum threshold of 100 home buyers or 10% of the total number of home buyers, whichever is lower, to take a defaulting developer to the National Company Law Tribunal.

In light of the ongoing crisis, it is inevitable to recognize that Promoters are going to go through a rough patch and hence, it can be reasonably said that the revision of threshold will indeed come as a saviour and protect them from unjustified insolvency proceedings. However, at the same time, when the government has not clarified whether the threshold limit of Rs.1 crore is limited only during the Covid 19 crises period or to a certain extended timeframe, the said change in the limit for the indefinite time period will be unreasonable and shall defeat the whole purpose of bringing the home buyers within the the ambit of financial creditors, as it creates one more hurdle for them to seek legal recourse against the defaulting Promoters.

  1. Reserve of India (RBI): Moratorium on payment of EMIs for three months on home loan:

On April 17, 2020 vide Circular No.RBI/2019-20/219DOR.No.BP.62/21.04.048/2019-20, Reserve Bank of India allowed all lending institutions to offer a moratorium to borrowers on repayment of all term loans on account of Covid 19 pandemic. This moratorium also covered credit card dues.

The moratorium was for payment of all instalments falling due between March 1, 2020 and May 31, 2020. However, it was also stated that “Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium.” The moratorium allows to pause EMI payments for three months, and the loan tenure will get extended by an equal number of months.. It is not a waiver; it only grants suspension from the obligation of payment during the three months if one has opted for moratorium offer.

  1. RERA extended validity period for registration of projects by three months:

Uttar Pradesh, Karnataka, Maharashtra, and Goa Real Estate Regulatory Authorities (RERA) have extended the validity period for registration of real estate projects in their state by three months in view of the nationwide lockdown in fight against COVID-19 pandemic.

RERA has decided to extend by three months the date of completion of the projects with the date of completion between 15 March 2020 and 31st December 2020. The revised registration certificate of such projects will be issued separately and sent to the concerned promoters.

  1. Government waives four months’ rent for IT Units in STPI.

The Government of India has decided to provide relief from payment of rent for small IT units operating out of Software Technology Parks of India (STPI) for four months as firms face challenging times due to the spread of COVID-19 and consequent lockdown.

The Ministry of Electronics and Information Technology (MeitY) has decided to provide rental waiver to the IT units/startups operating from STPI centers across India from 01.03.2020 till 30.06.2020. STPI is an autonomous society under MeitY and has 60 centers across the country and the initiative will provide rental waiver to the units located in these centers leading to provision of relief to the industry in this crisis.

  1. No tenant to be evicted

Maharashtra State Housing Department dated April 19, 2020, has issued instructions to landlords/house owners to postpone rent collection by at least three months. During this period of lockdown the general public is facing extremely difficult financial problems, since the proportion of people living in rented house in the state is significant and due to financial constraints it is not possible for the tenants to pay the rent for the house, therefore, no tenant should be evicted from the rented house in the state due to non-payment of timely rent.

Delhi Government issued Order on April 22, 2020, asking all landlords to not demand rent from workers including migrants and students, who have been devasted by the Covid 19 induced lockdown. Any landlord found violating the order will be booked under Disaster Management Act, 2005. On similar lines the Noida Administration passed an Order effective from April 1, 2020 asking landlords to collect rent from their worker tenants only after a month considering the financial crisis faced by these workers.

  1. Extension of timeline for payment of property tax.

States like Tamil Nadu, Telangana, have extended property tax payments for three months until June, 2020. Similarly, Karnataka government extended rebate on payment of property tax till May 2020.

  1. Fire and property insurance coverage gets one-time extension.

As per the standard insurance policy terms, fire and property coverage ceases to continue if the building or property insured is unoccupied for 30 days. Considering the lockdown of building and property due to Covid 19, the General Insurance Council, a self-regulatory body of the country’s general insurance has announced a one-time exemption for all businesses from losing their fire and property coverage. The one-time relaxation covers all policy holders whose property is unoccupied on or after March 25, when the lock down started till May 3.


The aforesaid relief initiatives adopted by the central and state authorities will hopefully help the real estate stake holders including promoters, home buyers, commercial establishments to survive and overcome the financial crisis. There is a speculation that government may provide more relief packages to real estate sector in coming days, nevertheless, to mention that it is the need of the hour that real estate industry should adopt new technologies and reduce their construction cost which will help the sector to generate more demand and sell inventory at a low cost.

This material and the information contained herein prepared by Algo Legal is intended to provide general information on a subject or subjects and is not an exhaustive treatment of such subject(s). Algo Legal is not, by means of this material, rendering professional advice or services. The information is not intended to be relied upon as the sole basis for any decision. Algo Legal shall not be responsible for any loss whatsoever sustained by any person who relies on this material.