The housing and urban affairs ministry is seeking explicit protection for homebuyers hit by insolvency action against builders such as Jaypee Infratech and some of the projects of the Amrapali Group as it is not satisfied with the amendments notified last week.
“We would like to be reassured that the notification specifically covers the category of homebuyers, who are vulnerable,” a senior ministry official told TOI. The ministry has taken up the issue with the finance and corporate affairs ministries and is expecting that interests of this segment are fully protected.
On October 5, the Insolvency & Bankruptcy Board of India (IBBI) amended its rules to mandate that any resolution plan for a company has to state how it has dealt with interests of all stakeholders, in what was seen as a move to comfort flatbuyers in various projects. While the law provides for protecting the interests of lenders and other creditors, as well as government revenues, it is seen to be wanting when it comes to those who have invested their life-time savings in buying an apartment or a house in a project being developed by a company that is facing insolvency action. Government sources acknowledged that when the Insolvency & Bankruptcy Code was enacted the problems of the real estate sector were not envisaged.
Urban affairs minister Hardeep Singh Puri had also flagged the concerns to finance minister Arun Jaitley and the IBBI notification is seen as to have been the result of intervention at the ministerial level. The regulatory agency for insolvency and bankruptcy has initiated other amendments in the past to deal with the emerging challenges for homebuyers.
This segment has been demanding amendments to the law, something that is yet to be decided, but sources said that the changes cannot be retrospective to deal with the current proceedings across the country.
Sources said the current problems will be limited to ongoing projects as steps taken in recent years such as enactment of Real Estate Regulatory Authority (RERA), introduction of goods and services tax, industry status to real estate and the IBC is adequate to protect the interests of homebuyers in the future.