A guide to the force majeure clause in real estate

In real estate contracts, where large investments and long project timelines are involved, unforeseen disruptions can have serious consequences. Events like natural disasters, government bans or pandemics can stall construction, delay possession and affect contractual obligations. This is where the force majeure clause comes into play. It offers temporary relief to parties who cannot fulfil contractual duties due to circumstances beyond their control.

In India’s property market, especially after the COVID-19 pandemic, the importance of the force majeure clause has grown significantly. Understanding how this clause works helps both homebuyers and developers safeguard their rights when unpredictable events disrupt real estate projects.

What is a force majeure clause?

The term force majeure originates from French, meaning “superior force.” In legal terms, it refers to extraordinary events or circumstances that prevent one or both parties from fulfilling their contractual obligations.

In India, the Indian Contract Act, 1872, governs such situations primarily through:

• Section 32: Deals with contingent contracts that become void when the event contemplated becomes impossible.
• Section 56: Covers frustration of contract, meaning performance becomes impossible or unlawful due to an unforeseen event.

The Supreme Court, in the landmark case Energy Watchdog v. CERC (2017), clarified that a force majeure clause must be explicitly included in a contract to claim relief. If not, Section 56 applies only in limited situations where performance becomes impossible—not merely inconvenient.

Common force majeure events in real estate contracts

The real estate sector is especially vulnerable to events beyond human control, making it essential to clearly define what constitutes force majeure. Commonly recognised events include:

• Natural disasters: Earthquakes, floods, cyclones, and landslides that halt construction activities.
• Pandemics or epidemics: Events like COVID-19 that lead to lockdowns or supply chain disruptions.
• War, riots, or terrorism: Civil unrest or armed conflicts affecting project execution.
• Government actions: Bans on construction, changes in land laws, or revocation of approvals.
• Supply chain or labour disruptions: Sudden shortages due to external causes such as transport bans.

Real estate contracts often include a detailed list of qualifying events to avoid ambiguity and disputes later.

How does the force majeure clause work in real estate agreements?

A force majeure clause temporarily suspends a party’s obligation to perform certain contractual duties when an unforeseeable event occurs. For instance, if a developer cannot complete construction due to a government-imposed lockdown, invoking the clause may provide an extension without penalties. The typical process involves:

1. Notification: The affected party must promptly notify the other party, usually in writing, about the event and its impact.
2. Documentation: Proof of the event and its effect on timelines or performance is required.
3. Resumption of performance: Once the event ceases, the party must resume obligations within a reasonable period.

Under RERA (Real Estate Regulatory Authority), developers can seek an extension for project completion timelines if a force majeure event occurs. This ensures projects are not penalised for genuine delays caused by uncontrollable circumstances.

Developer’s perspective on the force majeure clause

For developers, force majeure acts as a crucial protection mechanism during crises. It allows them to avoid penalties and maintain compliance when delays are caused by external factors. Key points developers must consider include:

• Timely intimation to RERA and buyers: Delays must be justified through official notice and credible evidence.
• Documentation: Proof such as government orders, photographs, or inspection reports strengthens the claim.
• Resumption of work: Developers are expected to take prompt steps to resume construction once conditions normalise.

During the COVID-19 pandemic, for example, several state RERAs, including Maharashtra RERA (MahaRERA) and Karnataka RERA, extended project completion dates by six months, recognising the lockdown as a force majeure event.

Homebuyer’s perspective on the force majeure clause

From a buyer’s standpoint, the force majeure clause can have both protective and cautionary implications. While it shields developers from penalties during genuine crises, it can also delay possession timelines. Before signing an agreement, buyers should:

• Read the clause carefully: Ensure it clearly defines qualifying events and does not include vague or overly broad terms.
• Check for notice requirements: Developers must inform buyers when invoking the clause.
• Look for fair timelines: Clauses should specify maximum permissible extensions.
• Be aware of remedies: If a delay exceeds reasonable limits, buyers can approach RERA or consumer forums for redress.

It’s also important to note that developers cannot misuse force majeure for routine issues such as funding shortages or internal delays. Such cases are not considered unforeseeable events under Indian law.

Force majeure and RERA regulations

The Real Estate (Regulation and Development) Act, 2016 (RERA) formally recognises force majeure under Section 6, which allows developers to seek project deadline extensions due to such events. Under RERA:

• Developers can apply for an extension of up to one year by providing valid reasons and supporting evidence.
• RERA authorities assess whether the event genuinely qualifies as force majeure.
• Extensions granted under this clause protect developers from penalties or licence cancellations.

For example, during the nationwide lockdowns of 2020, several RERAs issued blanket extensions acknowledging COVID-19 as a force majeure event. This demonstrated the Act’s flexibility to address extraordinary disruptions while maintaining fairness between developers and buyers.

Limitations and exclusions of force majeure

Despite its protective nature, force majeure is not a blanket excuse for non-performance. Indian courts interpret the clause narrowly, focusing on whether the event was truly beyond the party’s control and unforeseeable at the time of contract formation. Typically excluded situations include:

• Financial hardship or liquidity issues
• Labour shortages not caused by external events
• Delays due to poor planning or mismanagement
• Failure to obtain permits or clearances on time

In short, inconvenience or commercial unviability is not the same as impossibility. The burden of proof lies with the party invoking force majeure.

Tips for drafting and reviewing a force majeure clause

Whether you are a homebuyer, developer, or investor, carefully reviewing the force majeure clause is essential to avoid future disputes. Here are key drafting and interpretation tips:

1. Define qualifying events precisely: Avoid vague terms such as “other emergencies” without examples.
2. Specify notice requirements: Include timelines and mode of communication for invoking the clause.
3. Include mitigation obligations: The affected party must attempt to reduce the impact wherever possible.
4. Mention extension periods: Clearly state how much time is added to deadlines when force majeure applies.
5. Outline dispute resolution mechanisms: Arbitration or mediation clauses can help resolve disagreements faster.
6. Seek legal review: Professional vetting ensures compliance with RERA and the Indian Contract Act.

Real-world examples of force majeure in Indian real estate

The real estate industry has witnessed several instances where force majeure was invoked legitimately.

• COVID-19 pandemic (2020–2021): Nearly all major RERA authorities, including those in Maharashtra, Delhi, and Tamil Nadu, granted automatic project extensions ranging from six months to one year.
• Floods and cyclones: Projects in states like Kerala and Odisha received relief for delays caused by widespread flooding.
• Regulatory bans: Temporary construction halts due to environmental or pollution control orders have also qualified as force majeure in some cases.

These examples highlight the evolving interpretation of force majeure in India, balancing accountability with compassion for uncontrollable challenges.

Housing.com POV

The Indian real estate industry has matured significantly in its understanding of contractual fairness and accountability. The concept of force majeure has shifted from being a rarely invoked legal provision to a well-recognised safeguard essential for long-term project resilience.

As India faces growing environmental volatility and global interconnectedness, the need for clearly worded force majeure clauses will only increase. Builders and buyers alike must focus on transparency, documentation, and legal clarity. Balanced clauses that protect both sides ensure smoother project execution and strengthen trust in the real estate ecosystem.

Ultimately, the clause is not just a legal formality. It represents the industry’s preparedness to face uncertainty responsibly.

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