The Big Picture - Safeguarding Home Buyers Through IBC

The Supreme Court on Friday upheld amendments to the Insolvency and Bankruptcy Code (IBC), giving status of financial creditors to homebuyers. A bench headed by Justice R F Nariman, which disposed of a batch of over 180 petitions filed by various builders, said the RERA act which regulates the real estate sector should be read harmoniously with the amendments made in the IBC and in case of conflict the code will prevail. The bench said only genuine homebuyers can invoke insolvency proceedings against the builder and asked the Centre to file an affidavit taking the corrective measures. The judgement came on a batch of pleas filed by builders who have argued that remedies to homebuyers were available under the RERA Act and the amendments to IBC only enables duplication. On this edition of The Big Picture we analyse how home buyers will be protected through the IBC.

Guests - Sidhartha, National Economic Editor, Times of India,
Piyush Singh, Advocate, Supreme Court,
Sudhir Krishna, Former Secretary, Urban Development, Government of India,
Ravinder Pathela, Home Buyer,

Anchor - Frank Rausan Pereira

[shashiketan]

*82. SC JUDGEMENT: RELIEF FOR HOME-BUYERS*
- SC upheld amendments to IBC giving status of financial creditors to homebuyers.
- RERA act which regulates the real estate sector should be read harmoniously with the amendments made in the IBC and in case of conflict the code will prevail.
- aggrieved home buyer has three options now: RERA, Consumer protection Act, IBC.
- In backdrop of - JP Infratech Case (realtor): Bank took company under IBC . Homebuyers panic as they are not involved in the committee of creditors.
- Writ petition - PIL by realtors - SC directed - measures in place in the amendments - rights of homebuyers.

IBC & Home Buyers:
- Homebuyers will be treated as financial creditors & part of CoC (Committee of Creditors)
- No of homebuyers huge - representative should be elected. - voting rights according to finance provided.
- IBC supreme, RERA subservient.
- IBC intent not for insolvency rather for restructuring by IP (Insolvency Professionals) - time limit 180 + 90 days.
- Real Estate largest component so far in IBC - Poor resolution so far - 55% went to liquidation.

RERA & Home Buyers:
- 70% of the sales receipt to go in escrow account.
- Homebuyers and other allottees of a real estate project can now demand a refund of their investment, together with interest for any delay in handing over the possession.
- RERA can take over the delayed project: 14 lakhs unit delayed between 2 - 20 yrs.

Builders Concern: (SC assured safeguards are in place)
- IBC only enables duplication with existing provisions of RERA.
- Speculative investor
- Homebuyer defaulting

Challenges:
- RERA authorities not in place in many states - 1 RERA authority for 30 - 50 districts.
- Consumer courts next hearing - 18months - Pendency of cases - Justice delayed.
- Home buyers running around IBC: not a valid proposition.
- Liquidation not a good provision for homebuyers.

Way Forward:
- Local authorities have to be empowered: Common man doesn't want to go to Consumer courts, IBC
- Grievance redressal
- Self discipline in real estate: Take what you can manage.
- RBI or SEBI - regulate NBFC for easy availability of money.
- Government intervention needed in state level.
- Increase the capacity of regulator - appointment for backlog.
- Governance framework for homebuyers.

Supreme Court decision is a relief to home buyers who invest their live savings into the projects. Legal framework seems to be in place. The need of the hour is to create a simplified structure which would enable successful completion of projects with possession at the right time putting home buyers & builders in happy place.

[aditikaushik]

Safegaurding homebuyers through IBC
Introduction
* amendments to the Insolvency and Bankruptcy Code (IBC), giving status of financial creditors to homebuyers
* RERA act which regulates the real estate sector should be read harmoniously with the amendments made in the IBC
and in case of conflict the code will prevail.
* The bench said only genuine homebuyers can invoke insolvency proceedings against the builder
* builders-argue that remedies to homebuyers were available under the RERA Act and the amendments to IBC only enables duplication

Amendments
* 2018-amendment, 2016-enacted
* Home buyers included in def of financial creditors
* part of coc(committee of creditors)- insolvency
* Elected Representative of home buyers -coc voting rights for revival, resolution plan of company

Role of coc
* Under IBC- NCLT appoints a resolution professional, coc-deciding authority(like board of directors), deciding applicators

Need for the amendments
* Banks & financial institutions were capable of hijacking the recovery of money
* buyers were not at par with creditors
* Rera’s main dealings were not with creditors, they were dealing with developer
* Attractive Offers from builders

Major takeaways
* Homebuyers interest paramount
* Buyers at par with creditors
* IBC-supreme, Rera-subservient, in case of conflict IBC shall prevail
* Safeguard for Buyers- law is not for insolvency but restructuring-6-9 months given to IRP(interim resolution professional)

Way Forward
* Additional posts be created at Local level, real estate matters-additional district officer town & planning
* Developer venturing-Good team for project management, legal support etc
* Speculative investments should be desisted

Conclusion
Home buyers have now got a foothold because they are mostly unorganised & aren’t capable to be at par with financial institutions. Now they will join COC & get the necessary strength.
Thus is a landmark step but not the end of it

[SaikatSlg]

Mr. Sudhir Krishna speaks from a common man's perspective. A very good discussion. Thank you RSTV.

[AGONMALLESH]

Whatever The framework is required that should be Accessible and is the challenge before the government as far as home buyer is concerned...frank keep your smile up..!

[roadtofitness]

Best show for complete information for any subject

[Kr-fntx]

Topic to note down:
1.IBC amendment
2.RERA

[aspirant]

speculative investment and promising over capacity delivery from developers, self-discipline.

[bobminion]

In the panel they raised a concern why very less project on reaching NCLT goes for resolution, I think the main reason is we don't have Resolution option for Group Companies under the IBC. Remember in Real estate sector there are many group companies involved in construction. The government should also think about this as no one wants Liquidation to happen.


Now since the SC judgement has said that home-buyers will be given the status of Financial Creditors i think they too are considered as Secured Creditors as well.
( people having different say plz comment on my reply if i am wrong in assumption )

[mohitgupta]

Rs tv I request you to provide subtitles with video