Homebuyers may get quick refund from defaulters soon

Girja Shankar Kaura

Tribune News Service

New Delhi, May 23

In a move that may instil faith back in homebuyers and lift the fledging real estate sector, the Union Government on Wednesday approved the promulgation of an ordinance to amend the insolvency law so as to treat home buyers as “financial creditors” on a par with lenders to help them quickly get refunds from defaulting companies in the insolvency process.

The approval came at the Union Cabinet meeting chaired by Prime Minister Narendra Modi.

The move is aimed at classifying homebuyers in such a way that they can participate equitably in the insolvency resolution process under the 16-month-old Insolvency and Bankruptcy Code (IBC).

The amendment comes months after a new Section 29A was added to the bankruptcy code in November, introducing four layers of ineligibility for potential bidders.

The 14-member Insolvency Law committee headed by Ministry of Corporate Affairs Secretary Injeti Srinivas had among other suggestions made a case for treating homebuyers as “financial creditors”, which would allow them to equitably participate in an insolvency resolution process.

Briefing the media after the Cabinet meeting, Minister for Law and Justice Ravi Shankar Prasad said: “It’s a new legislation, the Cabinet has approved it.” He, however, refused to divulge details citing constitutional provisions.

When asked whether the Cabinet had approved some relief measures for home buyers as per the recommendations of the panel, Prasad said: “Till it is approved by the President, I cannot speak about the details.”

The ordinance, once approved by President Ramnath Kovind and promulgated, will provide relief to home buyers facing hardship due to incomplete real estate projects.

Under the code, “financial creditor” implies any person to whom a financial debt is owed. The financial debt can include money borrowed for interest.