On Tuesday, hundreds of home buyers filed a petition in the Supreme court of India to challenge the Insolvency & Bankruptcy law, their representative lawyer said, in between fears that bad loan issues are spilling over to hurt the ordinary man.
There were more than 500 people in the group who made their investments in a huge residential project outside Delhi, which has collapsed.
Not even a single investor has received the flat at the Silicon Valley township project even after more than four years of the original delivery date has passed.
A bank that gave the developer Amrapali 51 Crores, has moved to NCLT to initiate insolvency proceedings against the real estate firm after it defaulted on loan repayments.
Petitioners claimed that the IBC law introduced in 2016, gives banks that lend money to property developers an unfair priority and does not have any provision to protect homebuyers, their Advocate, Ashwarya Sinha told AFP.
If a company declares itself insolvent, Homebuyers are highly unlikely to get their flats or a refund.
“The law is flawed and it should treat homebuyers at par with secured creditors, Under the bankruptcy law, homebuyers are not listed as creditors. They will be termed as unsecured creditors at most, but even the principal amount is not secured in that case, forget about the interest that buyers have made.” Sinha added.
Unsecured creditors are the lowest on totem pole of claims.
These petitioners are among the millions of middle-class Indians who are eager to get their own homes. From mid-2000s, they poured investments into new residential projects on the periphery of the major cities as the property boom.
Many major residential projects in India held up as real estate firms put the money invested by buyers in other projects rather than completing the existing projects, leaving the consumers stranded, who poured their hard earned money.
Now, as India’s real estate sector is now debt ridden and delayed, the banks which have the highest levels of bad loans in emerging markets, have now stepped in to clean up soured loans.
Amrapali was the second to face insolvency proceedings after Real estate giant Jaypee Infratech leaving more than 30,000 people waiting for the flats they had paid for.