Home buyers demand Force Majeure in accordance with law of natural justice

The good news is that the Indian home buyers do understand that the lockdown post the Coronavirus was neither in the hands of the builders nor could have been anticipated. They hence don’t object to the period of six months being declared to be Force Majeure. The bad news is that the home buyers across the country feel the government’s declaration of Force Majeure is not in accordance with the law of natural justice. Track2Realty Online Poll finds that the home buyers are demanding equal leeway in the housing market. 

Understanding for Force Majeure

It seems nearly all the Indians, as many as 92%, understand that the unprecedented Coronavirus crisis and the subsequent lockdown leaves the system with no choice but to call it Force Majeure. A large share of the home buyers, 71% of respondents, even accept that six months of timelines extension is logical since the lockdown has severely affected the supply chain of the builders. However, not many are convinced, as many as 54%, with the proposed additional extension of three months.  

Contractual obligations binding for both parties

Nearly as many Indians, 88% to be precise, also question whether the one-sided Suo Motto Force Majeure for the extension of construction timelines is in accordance to the law of natural justice. Most of these home buyers feel the contractual obligations and jural relationships have to be equally liable to both the parties. They point out that there has been no fault of the buyer, and the buyer has rather been hit by both the house delays and macroeconomic impact. The mood of the nation is hence to see how best the government could balance the liability of the home buyers as well to make the contractual obligations of the home buyers equally flexible.    

Frustration of Contract for the buyers

Close to six of the ten existing home buyers, 56% to be precise, are even questioning whether they could get some legal protection under the Frustration of Contract, as defined in the Section 56 of the Contract Act. Most of the home buyers are awaiting the government to give them a clarity over their rights in an unprecedented pandemic. Force Majeure is just addressing the rights of the supply side and the demand side too has the added financial stress.

Rajeev Malhotra, a retired defence personnel has even contacted his lawyer for the same. He says, “If a defined legal provision could be applied for the developers, then the law also defines certain safeguards for the other party, the home buyers, if they can’t fulfil the contractual obligations in the changed circumstances.”  

No consideration of buyers’ added burden

With increased fiscal burden due to the salary cut or the job losses, both EMI and rent is an unbearable burden for the home buyers. The buyers are hence questioning the government to consider their added burden and announce some solutions for them as well. Their demands might be varied but as many as 90% categorically said they would like to see how much the government is sensitive to their problems.

Balance the burden of delays

The home buyers primary wish list is to balance the burden of project delays due to Force Majeure. The opinion might be divided over the ways & means to balance the burden, but what could not be debated is the mood of the nation in asking for law of natural justice. The majority of the buyers, as many as 84% wish an equal tenure of EMI deferment, as against the Force Majeure period, without any added interest burden for the buyers.  

Loan restructuring for both demand & supply

Sneh Lata, an advertising professional has a caveat when she points out to the reports of loan restructuring for the real estate developers. According to her, while the move is understandable, why is it being done only to smoothen the supply side. She demands the same level of loan restructuring for the demand side as well, that is for the home buyers. And she is not alone in having this thought. Her sentiments get echoed by as many as 74% home buyers across the country. The home buyers maintain the loan restructuring of the buyers could be an effective hedge after having weathered the salary cut and/or job losses.   

Why Force Majeure for long stuck up projects

The home buyers question why is advantage of Force Majeure applicable to the defaulting builders where the construction timelines are already stretched. No less than 62% buyers have objected to the timeline extension benefits being granted to those projects where construction was anyway stopped even before the lockdown. The buyers demand a case to case basis of construction timelines to be extended, rather than Suo Motto extension to all the projects.  

Stage of construction not considered

70% home buyers even question the rationale behind the blanket timeline extension to all the projects. The buyers believe while the construction has been hit where it has been at a full pace, there are many projects at the very initial stage of launch, in some cases construction not even started, and lockdown has not affected these projects’ execution cycle. They hence question the rationale behind Force Majeure to such projects.

Customer engagement missing

More than six out of ten home buyers, 64% suggest that the government decision to grant Force Majeure should have been in consultation with the buyers’ representation. A vast majority of them, as many as 54%, even believe that the customer engagement would have led to better balancing between the interests of the builders and the buyers.   

Exit option without penalty

Last, but not the least, the buyers, as many as 68%, categorically demand that the law of natural justice suggests that their financial burden should be equally considered. They demand a comprehensive policy for the buyers to ease their exit from the bookings without any fiscal penalty, if they are no more in a position to continue with the home loan burden. When it comes to the buyers having at the early stages of purchase with not more than 20% payment been made, as many as 86% buyers get vocal for the same.

Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.

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