“More than 3.84 Lacs Homebuyers are stuck in Stalled or delayed projects, with total value of more than 1.77 Lac Crs “
“Homebuyers are most aggrieved due to lack of proper legal framework, either through delayed possession, extra-charges, Pre-EMI, higher interest, etc”
Homebuyers under RERA
Real Estate (Regulation and Development) Act, 2016 (referred to as “RERA”) was implemented from 01.05.2017 with the motive to protect the homebuyers from the illegal and unethical practice by the various builders. RERA Act is a central Act however, the said implementation was made through States.
As per the RERA Laws, Every State was required to
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- Notify the Regulations/Rules to implement the RERA Act
- Constitute RERA Authority to (i) register the project, (ii) handle buyers’ grievances (iii) ensure compliance of RERA laws by builders (iv) Register Real Estate Agents
- Constitute RERA Appellate Tribunal to adjudicate the appeals
- Make a State-wise website to show the project status, complaint status, etc
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Till date, almost 34 States and all Union Territories have notified RERA Regulations, authority, and websites. More than 1 Lakh cases have been heard and accordingly, the order has been passed by various RERA Authorities.
However, the execution of RERA Orders has been a challenge under RERA. Even after the RERA order and issuance of Recovery Certificate u/s 40 of the RERA Act, the builders are not obeying and executing the orders. Again the homebuyers have struck, even after getting the RERA orders and RERA Recovery Certificate.
HOMEBUYERS under Insolvency and Bankruptcy (IBC/NCLT)
Another big legal reform, implemented in 2016 was the Insolvency and Bankruptcy Code, 2016 (referred to as IBC), with the object to reorganization and maximization of stress assets. The purpose to identify the stress company at the earliest and provide resolution.
IBC regulation may also be a good legal remedy for the revival of the builder company and project. If the project is extra-ordinary delayed and the builder is not taking any step, the joint petition by homebuyers u/s 7 of IBC Laws is the right solution. After the judgment by the Hon’ble Supreme Court followed by the amendment in IBC, the allottees in real estate projects were included under the category of the financial creditor with an explanation inserted in section 5(8) of IBC, through IBC (Amendment) Ordinance, 2018. Now, the homebuyer or allottee in the real project can initiate the insolvency process as a “financial creditor“.
Joint petition by Homebuyers
As per amended IBC Laws, the homebuyers being a financial creditor can file an insolvency petition before NCLT u/s 7 of IBC, only if
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- Homebuyers more than 10% of the total unit-holder in the real estate project, or
- homebuyers in 100 in numbers
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Whichever is less
As per IBC Laws, only financial creditors can be part of the committee of creditors (COC). CoC decides, every aspect regarding the proposal for revival, resolution process, etc. Prior to the amendment in 2018, the homebuyers or allottees were not part of financial creditors. Hence, they could not participate in COC which triggered a demand to include the homebuyers under financial creditors.
HOW IBC MAY HELP HOMEBUYERS?
IBC provisions may be a great support to home buyers who are facing a delay in possession or non-refund of money etc. Let’s give a brief for some prevalent circumstances :
1. Delay in possession – As per research by our RERA Deptt, approx. 70% of the real estate projects are delayed in terms of delivery. And approx. Rs. 5.80 Lac Crs are struck in such projects. If the claim & default are being arisen out of the agreement or by order of any court/authority order, you can file the case under IBC to initiate the insolvency process.
2. The project is abandoned – If the project is abandoned, you may approach to NCLT under IBC to start the corporate insolvency resolution process subject to the terms of the agreement and other legal parameters.
3. Non-refund of the agreed amount – If the allotment letter or agreement gives the right to claim the refund of the given amount and such obligation qualify to be a default under IBC, the petition can be filed before NCLT under IBC for recovery.
4. Subvention scheme – There are many kinds of subvention scheme which are being offered by the builders to attract the buyers. Many of such schemes are not complied with correctly. If there is any time value of money or consideration for use of money and such obligation qualifies as default under IBC, the allottee may file the petition before NCLT under IBC.
FILING OF CLAIM BEFORE NCLT
Many of builders are facing CIRP (corporate Insolvency resolution process) before NCLT. Filing of claim is compulsory to participate in the CIRP process and recover the amount from the company. After filing of the claim, the different resolution proposals from IRP or RP are required to be evaluated. It requires keeping track of development in the CIRP.
Relevant FAQ related to Home-buyers
We are listing the issues for the homebuyers which are as under :
A. How can homebuyers file their petition or case before NCLT?
Reply:-There are certain points that are to be taken into consideration whilst filing a petition for the homebuyers under the newly amended Section 7 of IBC. The points are being briefly discussed hereinbelow:
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- There have to be a total of 100 homebuyers or 10% of the homebuyers in a real estate project to file the petition, whichever is less.
- The homebuyers should be of one single project only that is being developed by the corporate debtor.
- The homebuyers are required to have all the relevant documents pertaining to their projects resulting in building up of their relationship with the Builder i.e., Builder Buyer Agreement, Allotment letter, and the payment receipts issued by the builder.
- The default in the case of every homebuyer filing the matter should have occurred. In other words, the date of possession, as promised by the builder, should have been lapsed.
- The default for the total homebuyers should be more than Rs.1 Crore to fulfil the pecuniary jurisdiction of filing the petition before NCLT.
WHY CENTRIK ?
Centrik is having strong teams for both for RERA and IBC. Team RERA has handled more than 600 litigation cases across India. The team of IBC consists of qualified insolvency professionals. Both the departments work in synchronization for maximization of value and provide justice. For more information please reach us at ibc@centrik.in or call our support.
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