Relieve home buyers in distress: let banks sponsor them

Copyright © HT Digital Streams Limit all rights reserved. Judicial processes must be fair to all home buyers. (IStockphoto) Summary home buyers who are held with stationary projects make IBC claims for relief – a road trapped in a policy. One way to solve such business would be for banks to buy the investments of home buyers in unfinished units to get construction back on track. A September 12 Supreme Court order brought focus on the solution of stressed housing projects. The court made several proposals on protecting the interests of home buyers while solving such cases. But there is perhaps a case to consider other solutions as well. The court’s emphasis on building homes for their handover to buyers is completely welcome. However, the idea of ​​solving Insolvency Project by Project, rather than the corporate entity as a whole under the insolvency and bankruptcy code (IBC), can be helpful. To prevent developers from using money taken from one set of home buyers for expenses to another project, the Regulation Regulation Regulation Regulation Act for each. But funds seems to continue. There are cases that the construction of one project is abandoned, leading to the distress of the buyer, while others continue from the same business. It stems from bad planning or fund for funding. Depending on different stages of completion and how the law is applied, the project -based resolution may privilege the demands of one set of owners above others. Judicial processes must be fair to all home buyers. And if a builder is unable to fulfill his obligations, it must be taken over quickly, with its assets on the block as a last resort. Somehow, the space for solutions must expand. To alleviate disappointed home buyers of their misery leaves the most important financial creditors – the banks that lent the defaulting developer and his home buyers – tremendously float a special vehicle (SPV) that buys the entire investment of the home buyers in units in construction units. In addition, these home buyers give the right of first refusal over these homes as soon as they are ready. If the creditors who own the SPV gain control of the builder (or project), they can have the SPV completed on its own or sell this vehicle to an asset construction company (ARC) that the houses can try to build. If the bow has access to finances from a special window of the Center for Affordable and Middle Income Housing, the cost-transition may be covered and the delivery of the home may be made possible. The promises to homeowners will be transferred with the SPV. How fair would it be to ask banks to buy out the interests of home buyers at full face value? Fairly fair. The banks that borrowed the latter money will improve their loan quality and also get a salesman collateral. Lenders that bankrupt the developer also need the houses built for capital recovery. Of course, banks may lose the time value of money locked in such projects. Yet they are well placed to analyze the viability of projects and the creditworthiness of developers. If they wander, they should expect to pay a price for it. A more radical but more effective solution to this whole mess would be to hinder the sale of residential units until they are ready for possession. Home buyers do not have to bear the double burden of rent and the repayment of loans to buy unfunded homes. This will end the risk to buy a home from a developer that can be better to develop problems as homes. It is true, it will force builders to tackle the entire burden of debt for housing projects. But it will also intensify the risk assessment skills of banks and developers to access funds from India’s bond market or real estate investment trusts. Whatever we do, ordinary people need to be saved heavy risks. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More topics #insolvency and bankruptcy Code #Real Estate Read next story