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IBC amendments to eliminate 'fly by night' real estate developers

Press Trust of India  |  New Delhi 

Jaitley today said the amendments to the and Code will eliminate "fly by night" operators in the and ensure timely completion of projects.

Earlier this week, gave his assent to promulgate the and Code (Amendment) Ordinance, 2018, which allows home buyers to be recognised as financial creditors under the proceedings.

Jaitley said the changes brought about through the Ordinance will help in formalising the

"Sound and structured 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 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.

Stating that in and around major townships have been coming up, and many of these are being developed by professional

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 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.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, June 08 2018. 19:35 IST
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