Helpless homebuyers

THE position of homebuyers under the new code is vague. There is no clarity about their status. Technically, they are neither financial creditors nor operational creditors. Reportedly, the homebuyer's claim ranks below operational creditors such as workmen, employees and vendors but, ahead of shareholders. 

A creditor, who is neither financial nor operational creditor, also has no statutory protection under the CIRP to invoke the code. Given that the erstwhile legal provisions related to winding up have been repealed, such creditors have lost their earlier right to initiate a liquidation of the defaulter real estate companies.

According to an expert, the insolvency code can be amended to safeguard interests of homebuyers. A real estate developer takes advance from its customers to develop a residential or commercial project in certain stipulated time. Therefore, customers have the right to recover their money if the developer turns rogue. As the customer pays his hard-earned money as an advance, he should be treated as a financial creditor. He should hold the same rights available to a banker or a financial institution under the code. A government official, however, rejected the idea saying that the IBC is a general law and it cannot address specific sectoral issues. As homebuyers are not recognised as creditors, the government has made a provision whereby their interests are protected at the time of liquidation of a company. A homebuyer should, however, approach the Real Estate Regulation and Development Authority (RERA) for comprehensive solution.

The uncertain status of buyers of residential and commercial premises has resulted in confusion and concern. A petition by the allottees of Jaypee Infratech, a real estate firm, is pending before the Supreme Court, which may clarify the status of the home buyer. More than 30,000 customers are affected due to insolvency of by Jaypee and Amrapali. — TNS