Homebuyers treatment as financial creditor: Builder loans may get costlier

Residential real estate developers will feel the pinch when it comes to funding

The proposed legal amendment to treat homebuyers as financial creditors, and at par with financial lenders, under the Insolvency and Bankruptcy Code (IBC) will have a positive effect on the former. 

However, the developer-financier model and relationship will see some strain. For, banks and other financiers will rethink their security and collateral policies, while also monitoring developers on the quality of their construction, say experts. An ordinance on the change was cleared by the Union Cabinet on Wednesday. It needs the President’s approval to take effect. (Parliament has to then approve a law to this effect, replacing the ordinance). 

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