News: Home buyers to get status of primary secured creditors-07.11.2017

Home buyers to get status of primary secured creditors

The Union ministry of housing and urban poverty alleviation (MHUPA) has accepted the long-standing demand of consumer organisations that home buyers should be given the status of primary secured creditor (PSC) in case the developer goes bankrupt or financial institutions begin process of liquidating assets.

Currently, if a builder becomes bankrupt, home buyers have last rights on his assets. The labourers have the first right on the proceedings from sale of his assets, then come financial institutions. Home buyers, who invest money in the developer’s project, come last.

Speaking with Mirror, Mumbai Graham Panchyat’s executive president Shirish Deshpande said, “We had been pursuing the matter with the Central government for suitable amendment to Insolvency and Bankruptcy Code (IBC) for year now, and the MHUPA has now accepted our position and assured to write to the ministry of corporate affairs to initiate proceedings to make home buyers PSDs.”

Deshpande said that in most cases, the home buyers, who invest their life’s savings, rarely get anything back if something goes wrong with the project. “However, the new amendment to Insolvency and Bankruptcy Code will put home buyers on equal footings with financial institutions and give them a chance to recover at least a part of their investment,” he said.

Deshpande further said, “The Supreme Court has also taken a favourable stand on this issue to protect the interests of home buyers, and the Central government is also moving in the same direction.” It may be recalled that the Supreme Court in its September 11in the case of Jaypee Infratech, against whom financial institutions hade initiated insolvency proceedings, directed the insolvency resolution professionals to take over the management of company and submit a resolution plan within 45 days that takes care of the interests of home buyers.