Plus, to ensure that their interests are protected, along with those of institutional lenders
and other financial institutions, the government
is planning to insert a new category of “clients” with rights in the insolvency
A senior government
official confirmed that discussions were on between the ministries of corporate affairs and finance to work out the details. "The government
will ensure homebuyers do not suffer," the official said.
As real estate companies
such as Jaypee Infratech
are being dragged into insolvency
proceedings by their lenders, mostly banks, fear has set in among those who had booked flats with these companies
that the money they had put in to buy homes with these builders
might be wiped out.
have moved after waiting for years to recover their sunk investments
in many of the projects floated by many real estate companies
at the height of the housing bubble. The banks
have used the recently created Insolvency
and Bankruptcy Code, 2016, enacted by Parliament.
Under the Act, lenders
can ask the insolvency
courts to seize the assets, mostly the buildings constructed by the real estate companies, to square off against their loans.
But homebuyers stand on a different footing as they are not lenders
to the projects.
Recognising the problem, the government
agencies are working to amend the definition of lenders
to include them as clients whose interests will be on the table and, thus, protected. In the specific case of Jaypee, while the Insolvency
and Bankruptcy Board had devised a form last week for the homebuyers to fill, the government
has decided that even if any buyer fails to provide any details by August 24, his interests would be protected.
The details of the buyers will be obtained from the registers of the real estate company by the insolvency
professional, Anuj Jain, and his team. About 32,000 homebuyers are believed to be affected in the Jaypee case. “We are learning on the move and the precedent is likely to be applied for other cases too,” the government