On May 23rd, 2016 when the cabinet gave an approval to treat homebuyers as financial creditors under the Insolvency and Bankruptcy Code 2016 (IBC) it was likely to give more protection to the new property buyers and boost the consumer's confidence, say experts.

Treated as operational creditors homebuyers by far were given the least priority in the process of property liquidation of a defaulting builder after financial creditors likewise banks. It was said that once the proposed changes are incorporated in the IBC, homebuyers will then have the right to initiate a resolution process against any builders to get their money back, just like other financial creditors.

It is said that this move will grant home buyers an equal priority as banks and other institutional creditors react while recovering dues from stressed or insolvent realty firms. The NCR division of builders' body CREDAI said 'this move will instil a sense of confidence amongst buyers of under construction property, for the continued flow of institutional and bank credit to the real estate sector.'

"However, the system must uphold the superiority of a bank mortgage over any other claim otherwise banks may become hesitant in lending to this sector," said Pankaj Bajaj Eldeco, president, CREDAI NCR.

If homebuyers are treated fairly in terms of their interests in addition to financial creditors, the real estate sector will move closer to becoming more transparent and accountable. This, in turn, will boost investor confidence, and many consumers may be positively motivated to buy houses leading to highly awaited investments in the real estate sector. To be truly relevant, the entire implementation process needs to be clarified for homebuyers.

They need to know how exactly they will be represented in the creditors' committee in other words, whether the NCLT will appoint a resolution professional to represent their rights and interests. Rating agency India Ratings, however, opined that this amendment could be credit negative for the lenders of real estate developers since the recovery proceeds will now have another layer of distribution, which was not factored in at the time of giving the loan to the builder.

"Eventually, with increasing customer confidence there will be more takers for home loans, benefiting housing financiers," the body said. Perhaps, the ray of hope to the buyers is still lit.