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.
The banks 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 official said.