IBC amendments to eliminate 'fly by night' real estate developers: Arun Jaitley

Union minister Arun Jaitley on Friday hailed the move to recognise homebuyers as financial creditors under the Insolvency and Bankruptcy Code Amendment Ordinance, 2018.

“The new ordinance equates an ‘allottee’ of a ‘real estate project’ to be a person having a commercial effect of borrowing. He is now treated as financial creditor,” Jaitely said in an article.

Earlier this week, President Ram Nath Kovind gave his nod to promulgate an ordinance amending the insolvency law, which also recognised homebuyers as financial creditors to real estate developers. Jaitley observed that real estate is an area where many “fly by night” operators have entered and that homebuyers were the worst sufferers.


“Some developers have very little resources of their own. They use the homebuyer’s money to develop, invest in land banks and then get caught in debt trap. The homebuyer is the worst sufferer. He has a triple whammy,” he said adding that not only a homebuyer has invested his savings with the developer, he may be paying EMIs on the loans taken and may continue to pay either rent of his currently occupied property or live in some alternate accommodation under compulsion.

The finance minister noted that post 1991 economic liberalisation, there has been a phenomenal growth in the creation of new townships, urbanisation and more particularly sub-urbanisation.