It may not be a cakewalk for home-buyers to unite and start insolvency proceedings against errant developers. But experts think it might be a fresh deterrent on the developers to delay handover of projects.
The Ordinance recently approved by the Union Cabinet amending the IBC, treating home buyers at par with financial creditor in the liquidation process, has come into force after getting the nod from the President.
According to industry sources, it is still not clear if a single home buyer can represent himself at a committee of creditors (CoC) meeting or will it call for some institutional framework or a society. However, the move is likely to bring down instances of malpractices usually resorted to by these developers as they will now turn more cautious.
“If a developer is taken to the NCLT (by a financial or operational creditor), earlier a home-buyer had no recourse or rights. But now with this amendment, home-buyers can take part in the CoC meeting and will also have the right to vote,” said Abhay Upadhyay, President of the Forum for People’s Collective Effort (FPCE).
This will be over and above the provisions under the Real Estate (Regulation and Development) Act, which can be invoked by a home-buyer against errant developers, Upadhyay said.
“While a home-buyer can invoke the RERA provisions for any redress, in case of IBC, they do not have any rights. This amendment gives buyers an additional option,” he pointed out.
According to Abhijit Bandyopadhyay, Co-Chairman, CII Eastern Region & Partner, Deloitte Haskins & Sells, even one case or instance of a home-buyer moving the NCLT will be good enough to keep the developers under pressure.
“Home-buyers may come together and form an association or nominate a person to represent their case. But this is certainly a step in the positive direction,” he said.
Home-buyers, who were earlier treated as unsecured creditors or operational creditors, came after secured and institutional creditors in terms of priority for recovery of dues. As operational creditors, their interest was also not fully taken care of.