How safe is your house if your realtor goes bankrupt? Law tweak gives homebuyers the edge

If the promoters of a housing project face insolvency and liquidation, homebuyers’ property will kept out of the process, the latest amendment to the rules by the Insolvency and Bankruptcy Board of India (IBBI) has said.

The tweak, which cuts the legal wrangle for homebuyers,  gives them a significant say in the liquidation process. 

“For the purposes of clause (e) of sub-section (4) of section 36, wherever the corporate debtor has given possession to an allottee in a real estate project, such asset shall not form a part of the liquidation estate of the corporate debtor,” an IBBI notification said. 

The insolvency regulator had last year pushed for an increased role of RERA by proposing compulsory registration of all real estate projects undergoing corporate insolvency resolution with the regulator by the insolvency professionals.  

Post this,  allottees of a real estate project would have first charges on the property. The Amitabh Kant committee report on real estate projects had also recommended that “the IBC needs to be reformed to better accommodate the complexities of the real estate sector”. 

Through its February 12 notification, the IBBI has introduced 12 key amendments to overall liquidation regulations to streamline the process, bringing in more transparency.