Homebuyers right in case of insolvency

Key Takeaways:

The IBC mentions that a minimum of 10% of the allottees should come together to file a case against the property developer.
The consumer can also approach the court of law under the Consumer Protection Act.
The home buyer can also approach the authority under the RERA.

 

Buying a home is one of the pivotal decisions that anyone makes. Investing in the property is a long-term decision, and for a person to purchase a house is like a dream come true. While the property market continues to flourish, some apprehensions continue to haunt the real estate sector. Sometimes the duration between purchasing the property and its possession becomes too long to wait. And this is where the battle of a homeowner starts. There have been several incidences wherein the property possession has been delayed, and the home buyer continues to fight the battle in the court of law.

 

Unfolding the details of the Insolvency Resolution Process in Real Estate

There have been several cases where the developer has been a defaulter and failed to give possession of the property on time. These cases have been ever-increasing after the Insolvency and Bankruptcy Code was rolled out. It gave more leverage to the creditors and an added advantage in case of legal proceedings against the property developer in the court of law. This code gives the right to the home buyer to start the proceedings against the defaulter, but again, as per the Insolvency and Bankruptcy Code 2020, there is a minimum threshold that the home buyers need to meet to bring the case to the court of law.

As per this Act, there should be a minimum of 10% of the allottees to come together to file a petition for insolvency against the real estate developer under the IBC. Despite the introduction of so many regulations, the trials may take longer than ever. However, there is no guarantee of the desired outcome.

As per the Supreme Court of India, if a single allottee or financial creditor is allowed to move the application, it may impact other allottees' interests. But the allottee has the option of approaching the  Authority under the RERA. Or else, the consumer also has the option to approach the court under the Consumer Protection Act.

 

What’s more to know?

As per the Insolvency and Bankruptcy Code, a home buyer is considered a financial creditor. However, the loan here is unsecured. Many a time, the home buyer is also considered a debtor of a home loan, for which he pays the EMIs, even if the real estate construction has not yet started. This puts them in a troublesome situation.

Despite being on a weaker side, it becomes difficult for the home buyers to take a claim on their property, and one of the key contributing reasons for this is the lack of an organized approach. They are not able to put up any proposal in the insolvency resolution process. 

 

Conclusion

Despite the IBC Act being biased, the buyers have not lost their hope. The protection of rights demands cohesive working of the home buyers and then presenting their case. With regulations flowing in and homebuyers becoming more aware of their rights, it is now easier for them to put their case forward.