The Union Cabinet gave its approval for an ordinance to amend the insolvency law so as to, among other things, treat home buyers as ‘financial creditors’ in the insolvency process. It is aimed at classifying home buyers such that they can participate equitably in the insolvency resolution process under the Insolvency and Bankruptcy Code IBC.
The Union Law and Justice Minister Ravi Shankar Prasad, however, declined to go into the specifics of the ordinance, saying “I cannot disclose anything because it’s new legislation – except to reinforce that the Cabinet has approved it”.
Prasad emphasized that Constitutional protocol prevents him from elaborating or speaking on the ordinance until it secured Presidential assent.
Commenting on the development, Anuj Puri, Chairman – ANAROCK Property Consultants, said the amendment effectively treats home buyers as financial creditors, and provides them enormous relief.
Residential property buyers are now effectively considered at par with banks and other institutional creditors when it comes to recovering dues from real estate developers that go bankrupt.
“This amendment will certainly go a considerable way in bringing more transparency into the overall funding of projects. With home buyers now getting the opportunity to claim their dues from builders, there is an even stronger burden on developers to deliver on time,” he said.