Relief for homebuyers: The Insolvency and Bankruptcy Board of India (IBBI) has introduced an amendment providing relief to homebuyers affected by insolvent real estate firms. The amendment dated February 12, ensures that properties allocated to homebuyers within a real estate project, even amidst builder insolvency, will be excluded from the liquidation process.

This update directly addresses the predicament of homebuyers who had already taken possession of their homes prior to the real estate company's insolvency declaration. Previously, such buyers faced limited recourse, often only the possibility of a refund.

With this amendment, properties for which possession has been granted to buyers will no longer be considered part of the estate liquidated. Even in cases of builder liquidation, the homes allotted to buyers will remain with them. Notably, this amendment will only come into effect in instances of liquidation and is not retroactive.

Enhanced financial accountability

Legal experts have commended this amendment for bringing clarity and protection to buyers who have already taken possession of their units. It may also lead to separate resolution plans for each real estate project or group of projects, accommodating diverse interests of resolution applicants.

Additionally, the IBBI has mandated the establishment of separate bank accounts for each real estate project under a corporate debtor, enhancing financial transparency and accountability.

This regulatory change addresses a longstanding issue faced by thousands of homebuyers ensnared in legal battles due to builder insolvency. Given that real estate comprises a significant portion of insolvency resolution cases, such regulatory measures are crucial.

The amendment resolves ambiguity surrounding homebuyers who have taken possession of units before or during the insolvency resolution process. It safeguards their rights by excluding their properties from the liquidation estate of the corporate debtor.

However, experts advise caution to prevent misuse of this amendment by developers who may hastily allocate unfinished units to buyers to shield them from insolvency proceedings. Ensuring fairness and adherence to promised specifications remains paramount in implementing these regulatory changes.