Buyers are Now Financial Creditors at Par with the Banks
Jun 13, 2018 Home Trading Steps
Since past few time buyers are suffering due to project delays wherein in some cases the project are not even in the under-construction stage. And all of a sudden developers declared themselves bankrupt, putting buyers in a helpless situation. Such as home buyers in case of Jaypee Infratech projects have lost all their savings and have to forget about their investment as well.
The Narendra Modi government on May 23 approved an ordinance to an amendment to the Insolvency and Bankruptcy Code (IBC) 2016, with an aim to fast-track the bad loan process. Due to this, the homebuyers’ would be now treated as the financial creditors. Especially, if a company defaults on its loan payments and has been taken the bankruptcy court, then such homebuyers shall be treated at par with the banks during the recovery process.
The amended code would come into effect after the approval of President Ram Nath Kovind. This is a huge relief for the home buyers or customers of developers like Jaypee Infratech, Amrapali, Unitech to name a few against whom recovery process has been initiated in the court. With such move, the power would be now in the hands of buyers as well.
Experts suggest that the changed rules would be applicable on the current cases wherein a resolution plan has been out. Earlier, if a company was to be liquidated then home buyers were placing at the bottom of the list of the creditors which are divided into eight categories. That is, if a real estate developer goes bankrupt, then its assets are sold to compensate the loss of the list of creditors and home buyers came last to stake their claims.
The earlier code did not guarantee security to the customers or buyers. And the buyers hit by insolvency have been knocking the doors of the judicial system for a long time. So the Supreme Court and the government set up a 14 member panel to review the code while making it friendly for the home buyers. The changed code ensures that the banks do not only look into their interest while deciding on the resolution plan for the bankrupt developer. Home buyers would now enjoy the same position as that of the banks.
The experts, however, say that the developers will now find it more difficult to secure the loan for the projects in future as now the recovery procedure would have another layer of distribution and the banks would have to share the proceeding equally with the buyers.
The Narendra Modi government on May 23 approved an ordinance to an amendment to the Insolvency and Bankruptcy Code (IBC) 2016, with an aim to fast-track the bad loan process. Due to this, the homebuyers’ would be now treated as the financial creditors. Especially, if a company defaults on its loan payments and has been taken the bankruptcy court, then such homebuyers shall be treated at par with the banks during the recovery process.
The amended code would come into effect after the approval of President Ram Nath Kovind. This is a huge relief for the home buyers or customers of developers like Jaypee Infratech, Amrapali, Unitech to name a few against whom recovery process has been initiated in the court. With such move, the power would be now in the hands of buyers as well.
Experts suggest that the changed rules would be applicable on the current cases wherein a resolution plan has been out. Earlier, if a company was to be liquidated then home buyers were placing at the bottom of the list of the creditors which are divided into eight categories. That is, if a real estate developer goes bankrupt, then its assets are sold to compensate the loss of the list of creditors and home buyers came last to stake their claims.
The earlier code did not guarantee security to the customers or buyers. And the buyers hit by insolvency have been knocking the doors of the judicial system for a long time. So the Supreme Court and the government set up a 14 member panel to review the code while making it friendly for the home buyers. The changed code ensures that the banks do not only look into their interest while deciding on the resolution plan for the bankrupt developer. Home buyers would now enjoy the same position as that of the banks.
The experts, however, say that the developers will now find it more difficult to secure the loan for the projects in future as now the recovery procedure would have another layer of distribution and the banks would have to share the proceeding equally with the buyers.
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