Your Developer Is Going Insolvent? You Can Claim Your Money Back
Despite the fact that the Real Estate (Regulation & Development) Act, 2016, is now in force, homebuyers, especially in Noida, are failing to see much respite as it stands today.
According to media reports, the National Company Law Tribunal (NCLT) has admitted IDBI Bank's plea for initiating insolvency proceedings against developer of the Yamuna Expressway Jaypee Infratech for defaulting on a Rs 526-crore loan. The group is primarily active in the Noida real estate market and its biggest incomplete project is Wish Town in Noida. The company has reportedly handed over only 5,500 flats out of the proposed 32,000. Of the 305 towers that the project has, 250 are incomplete.
Also read: Jaypee In Insolvency Case; Homebuyers To Raise Claims Till August 24
Similarly, about 30,000 flat owners in various projects of Amrapali Group are finding themselves extremely jittery since news spread that the Noida-based developer is also headed towards the same fate. Bank of Baroda (BoB) has reportedly approached the NCLT, seeking to start proceedings for insolvency against the group for loan default, a claim denied by the developer later.
It would be worth mentioning here that Noida real estate faces a unique problem. In its biggest strength — that is affordability — is also this market's biggest weakness. Data available with PropTiger DataLabs show rates of property in Noida are the cheapest among top nine cities, slightly higher only than the prices in Ahmedabad and Kolkata. In the first quarter of the financial year 2017-18, property prices in Ahmedabad stood at Rs 2,940 per sqft while the same space could be bought for an average price of Rs 3,932 in Noida.
The affordability factor has led to score of buyers in the national capital region choosing this property market as their future home. Depending on the same factor, real estate developers made a beeline to launch their projects in here. However, all did not go according to the plan as is evident now, resulting in great losses to promoters as well as investors.
If the current state of affairs is any indication, many other developers who have failed to keep their project delivery promises might be headed towards a fate similar to Jaypee's. Those who have invested in various projects of Jaypee have in fact taken to the streets to demand justice. Earlier, these buyers had a reason to worry. Now, with the government making certain changes in the existing law, they have nothing to fear.
What is the change?
The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017, provide for forms for submission of claims by operational creditors, including workmen and employees, and financial creditors. Earlier, there was no provision for individuals to make their claim under the insolvency law. That hole has been plugged by a government notification recently.
“There could be claims from a creditor, who is not a financial creditor or an operational creditor, and it needs a specific form for submitting its claim. The Insolvency and Bankruptcy Board of India has amended regulations to provide for a form (Form F) for submission claims by creditors other than financial and operational creditors,” a recent release by the Insolvency and Bankruptcy Board of India (IBBI) said.
"Those who are aggrieved can get remedy under this law (the Insolvency and Bankruptcy Code) . If there is any such move, the government's full sympathy is with those who have paid money and have rights on the flats," Finance Minister Arun Jaitley said in reply to a question on problems being faced by the Noida homebuyers.
How to make your claim?
The IBBI notification says that a person claiming to be a creditor should "submit proof of its claim to the interim resolution professional or resolution professional in person, by post or by electronic means in Form F of the Schedule."
The existence of the claim of the creditor may be proved on the basis of the records available in an information utility, if any, or other relevant documents sufficient to establish the claim, including any or all of the following: