The Central Government has made quite a few changes in the amendment act of Insolvency and Bankruptcy Code (IBC), inserting major changes put-up by a government-appointed panel. The real estate industry has reacted on the act in a mixed manner.

According to the amendments in the Insolvency & Bankruptcy Code, giving the status of financial creditors to home buyers will be a step in enthusing their confidence in the sector. Keeping the interest of the home buyers on par with banks & other financial creditors will mitigate their risks and safeguard their hard-earned savings stuck in real estate projects of insolvent companies. This step, combined with landmark regulations such as RERA, will go a long way in reviving the real estate sector grappling with huge trust deficit.

Pankaj Bajaj Eldeco, President of CREDAI-NCR expresses his view on the same and says:
“It is a good move for the protection of the money of homebuyers. RERA protects the money of buyers in an ongoing concern. Now the buyer’s investment is protected even in the case of insolvency. This will instill a sense of confidence amongst buyers of under construction property. However, for a continued flow of institutional and bank credit to the real estate sector, the system must uphold the superiority of a bank mortgage over any other claim otherwise banks may become hesitant in lending to this sector.”

This is a welcome move by the government which gives a solid right to the buyers to act as financial creditors in case of insolvency and the buyers shall not be left helpless in case of non-delivery or delay in projects. The buyers shall not be left in a lurch and shall not lose their life time’s hard earned money in the above-mentioned situations and shall have some guarantee or something to fall back upon as the case may be accordingly if the buyers are treated as financial creditors.

However, it needs to be seen how the resolution mechanism for claiming the dues actually falls in place for the concerned homebuyers. But this process must be entirely clarified to the homebuyers for its proper implementation. They need to know how exactly they will be represented in the creditors' committee – in other words, whether the NCLT will appoint a resolution professional to represent their rights and interests.

That said, this amendment will certainly go a considerable way in bringing more transparency into the overall funding of projects across the country. With homebuyers now getting the opportunity to claim their dues from builders, there is an even stronger burden on developers to deliver on time. Builders will now become much more cautious when going for funds from banks and financial institutions, as they would now also be accountable to homebuyers as well as the banks if their projects get defaulted.