It seems there is no respite for home buyers despite assurances from the government that their money will not go down the drain even if the builders are declared bankrupt. There is speculation among home buyers that several builders are looking for ways such as insolvency to escape the ambit of the Real Estate (Regulation and Development) Act 2016 (RERA), which will tighten the noose around the developer community for non-delivery or delay in projects. Over 1700 home buyers, who invested in AN Buildwell, are left in the lurch as neither have they got their dream home or commercial property nor the money back.
Insolvency cases are likely to go up, as though this method, builders will be able to transfer the losses to property owners. There are reports that more developers may be declared insolvent. Other top developers in Gurgaon, Noida and Greater Noida have also expressed their inability to pay up their debts.
Under the Insolvency and Bankruptcy Code, once a case is referred to the National Company Law Tribunal (NCLT), the tribunal gets 14 days for accepting or rejecting the case. Once the case is accepted, a resolution plan has to be implemented within six months, extendable by three months. In the absence of any resolution plan, the company goes into liquidation. It is the banks (lenders) who approach the NCLT against the company for default on loan repayment.
The rights of homebuyers under RERA are secure and if the developer, who is registered under state RERA, is found to be violating its norms, it can be taken to task. If a home buyer complains against the developer for violating RERA provisions, there will be an inquiry, and action will be taken. While insolvency code is for lenders.
Experts say even if builders opt for bankruptcy, state authorities will intervene and builders won’t be able to loot the hard-earned money of home buyers. The government will not only monitor the cash flow of the real estate firm but also ensure that the project is completed either by the developer himself, or a third party is brought in to complete it.
The SpireWood scandal goes back to 2014 when the construction of this project along with that of Spire Edge halted, and investors stopped getting their returns. There have been a total of approximately 1800 customers across both the projects, whose interests and investments have been at stake since then. While the information is available to the public that the promoters and shareholders have been responsible for syphoning off funds from AN Buildwell, the developer to other companies in Gurgaon, the question that comes to mind as an investor and an owner of such properties that can our legal system handle such scams efficiently?