With some top developers in the National Capital Region (NCR) filing for insolvency, a Magicbricks Consumer Choice Poll revealed that about 90% of investors are unaware of their rights and how they are impacted when their developer is declared insolvent.
Magicbricks, conducted the poll (sample size of 900) to get insights into buyer understanding of insolvent developers. In the light of the Jaypee Infrastructure group being run by an Insolvency Resolution Professional at the behest of IDBI Bank, (presently stayed by the Supreme Court), Ms. E Jayashree Kurup, Head- Content and Advisory, suggests that “The effort with insolvency is to ensure that buyers get their homes and lenders get their money. Being the first such case in real estate, the status of different classes of creditors, including buyers, is being defined. Once this is done, buyers will benefit from insolvency as work is in progress and handover of completed projects is being expedited.”
In the case of developers such as Jaypee, whose borrowing is backed by assets whose net worth is far more than the borrowed amount, this problem can be resolved when the handing over process begins in a phased manner and consumer receivables start flowing in regularly.
“Insolvency is invoked by a lender when the company does not have enough liquidity to service the debt taken from lenders to execute the project. Today, consumers have the choice to understand the process and act. All Jaypee Infrastructure buyers should have filled their claims forms by August 24th. If buyers have not done so, they can still go to Jaypee Infrastructure website and fill Form F giving details of their flat number, the amount paid and the tripartite agreement with the builder and bank that has been executed,” said Jayashree.
The Jaypee Aman project, under the leadership of the Insolvency professional Anuj Jain, the units were almost at completion stage and 25 units were handed over to users over the weekend. The last installment of their payments fuels liquidity in the company which is used to give possession of 450 + units in Aman and 1 tower of Kosmos in the next 45 days, exceeding the number of deliveries to 1150 units. Thus, consumers stand to gain by the insolvency route.
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