Relief for Homebuyers: Allotted Flats Safe from Builder Bankruptcy

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    The Insolvency and Bankruptcy Board of India (IBBI) recently made a significant amendment to provide relief to homebuyers. According to the new rule, flats that have been handed over to buyers in a real estate project will not be included in the builder’s liquidation process.

    Before this change, homebuyers who had already received possession of their flats faced uncertainty when the builder’s company went bankrupt. They were left with no recourse except to seek a refund.

    The amendment, dated February 12, specifies that properties for which possession has been given to buyers will not be considered part of the builder’s assets in case of liquidation. This means that once a homebuyer has been given possession of their property, it will remain theirs even if the builder faces liquidation. Previously, buyers who had taken possession were treated the same as those who hadn’t, leaving them vulnerable.

    This change aims to address the confusion and protect the rights of homebuyers who have already received possession of their units. It ensures that completed projects will not be affected by the builder’s liquidation process.

    Experts believe that this amendment brings clarity and security to buyers. It also allows for separate resolution plans for each real estate project, catering to the diverse needs of buyers and investors.

    Additionally, the IBBI’s amendment mandates separate bank accounts for each real estate project under a corporate debtor. This ensures financial transparency and accountability in the industry.

    The amendment comes as a relief to thousands of homebuyers who have faced legal battles due to builder bankruptcies. Real estate accounts for a significant portion of insolvency resolution cases in India, and this amendment seeks to streamline the process and protect buyers’ interests.

    The need for this amendment was evident from various legal cases where homebuyers were left in limbo after the builder’s insolvency. With this change, buyers who have taken possession of their units can have peace of mind knowing that their homes are protected from liquidation proceedings.

    Legal experts emphasize that this amendment safeguards the interests of homebuyers by ensuring that their properties remain theirs even in the event of the builder’s liquidation. It brings much-needed clarity and protection to buyers who have invested their savings in real estate projects.

    However, it’s important to ensure that this amendment is not misused by developers. There should be safeguards in place to prevent developers from hastily transferring unfinished units to buyers to avoid liquidation consequences.

    Overall, the IBBI’s amendment is a positive step towards ensuring fairness and protection for homebuyers in India’s real estate sector.

    Also read: MahaRERA, ASCI Team Up to Spot Non-Compliant Real Estate Developers

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