The enactment of the Insolvency and Bankruptcy Code, 2016, (IBC) along with the Real Estate (Regulation and Development) Act, 2016 (RERA) has ushered in a new era of tighter regulation for the Indian real estate sector. Both these legislatures have strengthened the hand of homebuyers, giving them multiple forums to get justice. They can now file claims before the consumer courts, under RERA, and before the National Company Law Tribunal (NCLT) invoking IBC. The IBC — one of the Modi government’s biggest reforms - has brought badly-needed clarity into India’s bankruptcy framework. It has rebooted the country's entire business environment as companies can also now be revived by resolution of bankruptcy, instead of going for liquidation.

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Speaking on the matter Anuj Puri, Chairman at ANAROCK Property Consultants said, "Over three years since the enactment of IBC and the formation of the Insolvency and Bankruptcy Board of India (IBBI), homebuyers have been empowered by this landmark regulation. Real estate and allied businesses account for close to 20 per cent of the total of 2542 cases filed with the IBBI since its inception on 1st December 2016 till September 2019. This clearly highlights developers' financial crisis, and how sectoral headwinds have led to insolvency for many players."

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Going by data provided by the Insolvency and Bankruptcy Board of India, there has been a steady increase in the number of corporate insolvency resolution process (CIRP) cases over the last three years. If we consider trends in the real estate sector, the total number of cases over the last one year alone has more than doubled – from 209 cases (including closed and ongoing) in Jul-Sept 2018 to 500 cases in the corresponding period in 2019. Further analysis reveals that the number of cases closed has nearly trebled. Of the total of 209 cases during the said period in 2018, nearly 68 were closed. At this point in 2019, nearly 201 cases have been closed out of the total 500. In other words, IBC has been instrumental in providing faster resolution of cases.

Homebuyer-empowering Amendments
1] The IBC (Amendment) Act 2019 revised the timelines for the resolution process and extended it to a period of 330 days from the previous outside limit period of 270 days;
2] Despite the revised timeline period, as on September end 2019, nearly 535 cases of the 1,497 ongoing CIRPs had exceeded the 270-day timelines, while 324 cases exceeded 180 days but were within the 270-day timeframe; and
3] IBC has also redefined the definition of ‘financial debt’. The new definition allows homebuyers to invoke IBC to commence CIRP against a developer company. Effectively, it has put homebuyers at par with secured financial creditors. It allows them to have representation in the Committee of Creditors (CoC) and gives them voting rights under specific modalities.

In short, homebuyers now have the same powers as banks and institutional creditors. Prior to this amendment, homebuyers’ recovery status was vague at best. Only banks and other lending financial institutions had any real claim and rights of recovery in a developer’s assets when liquidated as part of the bankruptcy process.