– By Kundan Shahi
The majority of individuals in the world’s population have made their greatest single investment in a home. The real estate industry in India is vast, varied, and ambiguous. Where the relationship between the consumers and seller has always been a matter of concern and the redressal of the dispute has always been a time-consuming process. Homebuyers had to go to consumer court in the past if they wanted to file a complaint against unreliable builders.
Challenges faced by the homebuyers
Purchasing a house in India comes with several risks and challenges. Here are some of the problems faced by homebuyers:
1. There is a risk of disputes that might occur between the homebuyer and the builders.
2. To determine title, ownership and, possession of the property.
3. To determine if the property is free of charges, lawsuits, or obstruction. Failure to do so could get homebuyers in trouble shortly.
4. To determine the legal status of the property.
5. Check the documents to see if the registration and transfer are complete.
Above mentioned are some of the most common problems homebuyers face and resolving these issues has a lot of technicalities in it and is long delayed. Everything has changed in the recent past after the enactment of the Insolvency and Bankruptcy Code (IBC), 2016, and the Real Estate Regulation and Development Act (RERA), 2016. The Insolvency and Bankruptcy Board of India (IBBI) by the way of an amendment in the code has given the status of “financial creditors” to the homebuyers, by this the homebuyers can now initiate the CIRP and can approach the NCLT to resolve disputes of default and delayed possession.
Litigation funding to the rescue
In a country like India whose judicial system is rarely known for its speed and where a large number of property-related disputes are not heard promptly due to a lack of adequate funding, litigation funding emerges as an excellent alternative. Litigation funding is a method that pays for the costs of legal procedures to make it easier for people and businesses, especially those who are struggling financially to recover claims. In the case of homebuyers’ litigation funding can help in a way that instead of the homebuyers bearing the expenses of the litigation, a funder does so in exchange for a portion of any recovery obtained via the proceedings.
This form of funding is frequently provided on a non-recourse basis, meaning that if the homebuyer’s case gets unsuccessful he will not be obligated to pay back the litigation funder’s legal expenses. Thus, the litigation financing agreement often stipulates that the litigation funder assumes the majority of the risk, including the risk of losing a claim and the risk of any damages, levied as a consequence of the lawsuit involving the claim. Litigation Funding allows litigation funders to invest in specific claims according to their probability and to invest in multiple claims at the same time. To win a case against the builders, the homebuyers need to be adequately funded and not overwhelmed by the financial clout of large corporations.
With an overall increase in the real estate sector of India and the country’s economic development, there ought to be more disputes between homebuyers and builders. The costs are covered by the funder and the application is processed by experts to ensure a logical conclusion is reached.
Litigation funding not only provides an important resource, but it can also provide important strategic benefits to homebuyers. Before selecting whether to accept a claim, the litigation funder’s own risk assessment team that often evaluates each party and the claims made by them, and the financial status of the parties. However, a close assessment of the changes demonstrates that lawsuit financing benefits homebuyers. The legislation amendments are beneficial to buyers who are having issues with unfinished real estate developments. Project delays have an impact on homebuyers since they commit a sizeable amount of their funds to a down payment and an EMI on the loan while continuing to pay rent where they now live. The most recent change to the Code has now changed this scenario.
The enactment of RERA and IBC
It is very commonly witnessed in India where homebuyers are frequently deterred from starting legal actions to collect claims that could have the potential to be successful however, the passage of the RERA and subsequent IBC strengthened the legal rights of aggrieved home buyers in India and gave them various options to exercise their legal rights. According to several reports, commercial contracts in India are settled in around 1445 days, while it takes about 589.6 days in Organization for Economic Co-operation and Development (OECD) nations, according to the World Bank’s Ease of Doing Business Report, 2020 the litigation expenses in India are about 31 per cent of the claim value, which is about 10 per cent more expensive than in OECD nations because of the high expenses involved in pursuing the claim.
(Kundan Shahi is the founder of LegalPay)