Earlier this week, President Ram Nath Kovind gave his assent to promulgate the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, which allows home buyers to be recognised as financial creditors under the insolvency proceedings.
Jaitley said the changes brought about through the Ordinance will help in formalising the real estate sector.
"Sound and structured real estate developers would remain. The 'fly by night' operators would be eliminated. Projects would be completed in reasonable time and investors would get their share of allotments expeditiously," he said in a Facebook post.
He said construction is recording a double digit growth and real estate regulator RERA and the new ordinance would only catalyse this process further.
The new ordinance equates an 'allottee' of a 'real estate project' to be a person having a commercial effect of borrowing as he is now treated as financial creditor, Jaitley said.
"He can initiate a corporate insolvency for a resolution against the errant developer. He acquires the right to be on the committee of creditors. He gets voting right. He can influence the resolution process. In the unlikely eventuality of liquidation, he stands at par with other financial creditors," he added.
However, many 'fly by night' operators have entered the sector, he said, adding some developers have very little resources of their own.
"They use the homebuyer's money to develop, invest in land banks and then get caught in debt trap. The homebuyer is the worst sufferer. He has a triple whammy. He has invested his savings with the developer. He may be paying EMIs on the loans taken and may continue to pay either rent of his currently occupied property or live in some alternate accommodation under compulsion," Jaitley said.
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