Insolvency and Bankruptcy code (Amendment) Ordinance – 2018

Insolvency and Bankruptcy code (Amendment)

Paying a large chunk of your hard-earned money to a developer or builder in the hope of owning a home. Undue delay from the builders in the completion and handover of the building. The hapless homebuyer waiting with fingers crossed on when he would get his apartment; or at least a portion of the money paid. This scenario in India is in for a change; as the President promulgates the ordinance to amend the Insolvency and Bankruptcy Code.

insolvency and bankruptcy code (amendment) - 2018

According to the ordinance, homebuyers will now be treated as financial creditors. This means that where any corporate debtor commits a default; a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor.

The direct implication of this ordinance is that the additional protection for homebuyers may result in reduced overall financing costs.

Am I eligible?

  • Only those homebuyers who have completed the registration formalities of an announced project recognized under the Real Estate Regulation & Development Act (RERA) will be considered as a financial creditor.
  • The Ordinance clarifies that an allottee under a real estate project will be considered a financial creditor.  An allottee includes any person to whom a plot, apartment, or building has been allotted, sold, or transferred by a promoter (real estate developer or development authority).
  • Will also cover Homebuyers who purchased properties in the redevelopment scheme.
  • Not eligible if your account has been a non-performing asset (NPA) for more than a year. Or if you are a related party to the debtor (with certain exceptions).


Depending on the share of the money lent to developer; the power and preference of the creditors in decision making about the future course of action will vary; whenever there is a loan default or bankruptcy filing. This could mean that if a developer goes bankrupt, the homebuyers alongwith the other creditors will have the authority to decide whether or not to sell off the assets, appoint a new contractor to complete the construction of the building or provide additional funds to complete the project and then sell it off to recover the money.

However in the case of a large real estate development project, since there would be many affected buyers; it would be in the best interest of the homebuyers to engage a common lawfirm to act on their behalf.

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1 Comment
  1. Great Post!
    Thank you for sharing this useful information.

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