Mumbai: The Centre's move to treat home buyers as financial creditors through an amendment in Insolvency and Bankruptcy Code (IBC), 2016 may seem good news for them, but it could have some adverse effects for buyers as well as lenders.

With home-buyers treated on a par with financial creditors, lenders could be staring at a higher haircut on their construction loans should a developer go bankrupt. This could force the lenders to re-price their loans, leading to a higher interest rate burden on developers.

Experts also feel that builders could become more cautious while taking funds from banks as they will now be accountable to homebuyers.

"Previously, if any realty firm went through bankruptcy, the priority of recovering dues from the project was first given to financial creditors such as banks and institutions, followed by operational creditors such as vendors and employees.

"Homebuyers were widely regarded as merely consumers, placing them at a disadvantageous position and exposing them to significant risk upon investment in under-construction projects," Ramesh Nair, CEO & country head of JLL India, said.

"However, (after the amendment), if you are a homebuyer in a project that has been stalled by insolvency, you will be granted equal rights with other creditors such as banks, making it easier for you to recover your money,'' he added.

Taranpreet Singh, partner at TASS Advisors, said: "It will have its own implementation challenges on how a buyer will initiate the legal process of recovery, collaborating with other buyers and seeking legal assistance vis-a-vis bankers and other lenders who have great access to in-house legal services and will have mortgage on the assets of the bankrupt builders.''

Anuj Puri, chairman of ANAROCK Property Consultants, said for the amendments to be effective for the homebuyer, the entire implementation process should be clarified to them so that they know how they will be represented in the creditors' committee or, whether the NCLT will appoint a resolution professional to represent their rights and interests.

With the resolution process now having to consider the interest of home buyers as well, banks could also be in for a problem. Lenders may have to take higher haircuts and this apprehension may prompt banks to charge higher interest rates from developers.

According to India Ratings, with the dilution of lenders' right in liquidation proceeds, financiers have to start re-pricing lending yields and this could result in borrowing rates hardening for developers relative to their credit profile.