NEW DELHI: IN a move that could provide relief to homebuyers whose money is stuck in incomplete real estate projects, the Cabinet on Wednesday cleared an ordinance to amend the Insolvency and Bankruptcy Code. The amendment proposes to classify home buyers as ‘financial creditors’, which means they will have the same legal rights as banks to recover dues. This is a significant change from the current IBC, which recognises only banks and financial institutions as creditors who can initiate insolvency resolution process against defaulting firms.
The ordinance will become law once approved by the President.
The new law comes in the wake of increasing instances of homebuyers being cheated by builders who don’t deliver projects on time and refuse to return the money collected from them citing financial trouble. The corporate affairs ministry had received many complaints that despite paying full amount, homebuyers were not handed over properties as these companies were facing financial troubles. The ordinance will help many homebuyers to recover their money stuck in incomplete projects of Unitech, Jaypee Infratech and Amrapali.
Experts say the new law will also put pressure on developers to deliver projects on time. “We will now see builders become more cautious while taking funds from financial institutions and banks, as they would now be accountable to homebuyers as well, if their business goes belly-up,” said Anuj Puri, chairman – ANAROCK Property Consultants.