Practical approach by Home buyers to Deal with Real Estate Developer's Insolvency

Jaypee Infratech it is the first real estate company that has entered insolvency proceedings though there are a lot like Kohinoor Group,Mumbai are facing liquidation proceedings.

The insolvency proceeding will give answer a lot of questions like : 

1) what is claim preference when a so called Real Estate Developer raise money from bankers and customers in the pretext of constructing a building, divert money and than claim insolvency. 

2) can secured creditor (who are just part owner of property) can do whatever it like ? Without consent of customers?

3) Are customers are also secured creditors to the extent of their ownership in the under construction unit? ( RERA recognises this and that where it require 70% consent of all customers)

Bankruptcy law has made it simpler to go bankrupt without realising fate of customers.  So what should the home buyers do when real estate developer take short cut and declare himself insolvent?

Don't give easy turf to Bank or Developers

Buyers can give tough fight to all stake holders to protect their interest. They need to do detailed SWOT and realise following : 

a) in an ongoing project, where construction of complete more than 30-40% complete than bankers security on remaining unsold unit is zero unless it is completed. Here buyers and bankers are on same risk zone and hence "Advantage buyers to stop any arbitrary decisions by lenders"

b) File breach of trust cases against developer since money was paid to him for construction and not for repayment of his loans/interest or personal profiteering. Profits are not accrued to developer till completion of project.

c) Raise your claim in The National Company Law Tribunal ( NCLT)

(i) Claim that the money that was paid by him (Buyer) was never meant for repayment of secured creditor. The secured creditor was paid by developer through diversion of money and breach of trust. The secured creditor is making undue profits in all cases. 

(ii) No order of NCLT should be passed without detailed investigation in accounts of the developers. Buyers should claim first right on  all assets purchased by Developer with the help of diverted money, since the diversion itself was breach of trust.

d) Form larger groups : 30000 buyers of Jaypee must be paying atleast Rs 150 cr EMI to various bankers. They can collectively negotiate with bankers on EMI and revival. Always take into account how much money secured creditor has already received back (Interest and repayment of capital) rather than just their outstanding.

e) Don't Wait and watch : Patience is the biggest problem with Home Buyers in India. Nothing will change unless thousands of home buyers come together and make sure that there is constant pressure on government, administration, developer, secured creditor and judiciary.

f) Find out if other customers have initiated actions under Indian Penal Code, Negotiable Instrument Act etc against the Developer and how can you strengthen their case.

Finally, customers need to make sure that developers just don't abuse process of law and get away to London or Dubai !

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10 Tips For First-Time Home Buyers in India

Easy availability of cash money, economic growth coupled with healthy disposable income makes the young Indians to consider real estate investment. P Chidambaram, at the budget of 2013, raised tax deductions up to 1 lakh for the new buyers. This has greatly promoted the housing sector.

As per the recent survey conducted by the real estate industry, the average age of first time home buyers in India has reduced from 39 to 30. So, if you are a first time home buyer, you need to consider important tips. While the socioeconomic status, the age and profile of the home buyers is changing, what is not changing is the trepidation and hesitation that comes with taking such a huge investment decision.

However, it is great to know that a buyer is free to file a Complaint about Builder in India, if the project is not completed timely. Check out the home buying tips below.

Financial planning is the foremost

Before you make any investment decision, you need to plan out your finances. Try to review the current financial obligation like life insurance, student loan and any other commitment in order to get the true picture of monthly income. The budget for purchasing a property is based on the money which you may afford for home loan EMI. Apart from money reserved for EMI, you also need to have a saving account to cater necessary expenses. There must be money for parking charges, medical expenses and sundry expenses.

Assessing the Future needs and Objectives 

When you plan to invest in a home, you need to assess present needs along with the future needs. Some individuals just want to buy a property for the family members while others wish for capital appreciation of the long term investment. So, when you make an investment, try to assess your objectives.

Know about the Interest Rates 

If you are a first time buyer, you will be confused between floating interest rate and a fixed interest rate. Those who want a complete peace of mind, they can choose a fixed interest rate since the rate of interest remains constant and same throughout the tenure. But then, if you are interested in floating interest rate, evaluate the market along with the current economic situation. Get in touch with your financial adviser to know the kind of interest to choose. In fact, you can also choose the mixture of fixed and floating interest rate.

Improve your credit score 

If you want to avail loan at lower interest rate, you need to improve your CIBIL score. CIBIL score plays a very crucial role in the application process. The moment you fill up the forms, the lender checks your credit report and the credit score. Your loan will be improved if credit score is good.

Shop around for Loan 

To get a loan suitable for your situation, you need to shop for the loans by checking various lenders and compare the rate of interest. Compare loans and negotiate with the banks.

Getting a Pre-loan

Pre-approved home loan refers that the bank has carried out its due-diligence check on the credit report and has confirmed virtually to the loan. The purchaser gets the idea about his budget and thus he can proceed confidently towards the purchases.

Get to know about the Locations 

Before making an investment, know about the locations that are experiencing growth. It must have a good connectivity and must be in close proximity to shopping malls, airport, railway stations, etc.

Evaluate the Credibility of the Builder 

Check out the past projects of the developer and judge the credibility. The quality of construction and the value of his rate of appreciation need to be found. Get in touch with the past clients and avail Feedbacks about builders prior to choosing any. To save yourself from posting Complaint about Builder in India, this is a necessary step.

Payment Option 

Before signing the dotted lines, inquire about the payment options. Check out whether the builder offers construction liked payment, time linked payment or cash and cheque payment.

Verifying all the Documents

Go through all the legal documents involved with the property sale and purchase. It is always better to get in touch with a real estate agent to make sure everything is smooth.

As the first time buyer, you will benefit a lot from the above tips. For the home buyers, it is necessary to read the Feedbacks about Builders and then make a choice.

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