New Delhi: Union Cabinet has given one more reason to the homebuyers to cherish. The Union Cabinet has approved amendments to the IBC (Insolvency and Bankruptcy Code). Now, the homebuyers will be treated similar to the banks and financial creditors in priority for recovering of due from bankrupt or insolvent real estate companies.
After the proposed amendments got clearance from the Cabinet on Wednesday, now the homebuyers will get similar benefits as banks and institutional creditors used to get if a real estate company undergoes insolvency proceedings.
The decision on amendments was taken after a high-level panel recommended the government to treat homebuyers as financial creditors and allow them to evenhandedly participate in the insolvency resolution process. Earlier, under the Insolvency and Bankruptcy Code the homebuyers were considered as ‘unsecured creditors’ who were given priority after the institutional or secured creditors.
As per the experts, the IBC and Real Estate (Regulation and Development) Act (RERA) were pitted against each other if any real estate company broke down as homebuyers were not treated as financial creditors.
A recent report of the industry body ASSOCHAM read, “While IBC allows companies to file for bankruptcy to provide relief to debtors or creditors, RERA looks at providing relief to home buyers and seeks to hold developers or builders responsible if the project is delayed.”
There is also exemptions to MSMEs (Micro Small and Medium Enterprises) under the Section 29A of the IBC law in the proposed amendments. As per the Section 29A the wilful defaulters, defaulting promoters and related persons are barred from the process of insolvency.
Notably, some of the real estate companies are already facing insolvency proceedings which had left homebuyers – who had invested their money in their projects, in a bad situation as the current rules didn’t gave them priority in the recovery of dues. In the same context, the homebuyers of Jaypee WishTown had opposed liquidation proposal of Jaypee Infratech earlier.