In a big boost for the rights of home buyers, the Supreme Court has ruled that they hold the status of financial creditors. The landmark ruling, which upholds an amendment in the Insolvency and Bankruptcy Code, means that home buyers will get preference when dues are recovered from bankrupt real estate companies.
Home buyers will enjoy the status of banks and institutional creditors and can take real estate companies into bankruptcy proceedings.
A bench headed by Justice RF Nariman dismissed pleas of over 200 real estate companies to amend IBC (Insolvency and Bankruptcy Code). The amendment focuses on the rights of home buyers who contribute equally in financing the real estate projects. The amended order also ensures the buyers can acquire a seat at the Committee of Creditors.
The builders had challenged the IBC amendment citing that it would result in duplication as the homebuyers have already RERA to their rescue.
The apex court clarified that homebuyers pay large amounts to the companies which in turn become the principal for building the project.
The order says that long delay in the delivery of possession will have a drastic impact on the homebuyers. The order added that banks are in a strong position under the code as they are financial creditors even though the maximum investments in real estate come from the home buyers.