In a bid to provide relief to homebuyers, the Insolvency and Bankruptcy Board of India (IBBI) has allowed resolution professionals (RP) to hand over possession of plots, flats, or buildings to homebuyers while the resolution process is still ongoing.
Through amending ‘Insolvency Resolution Process for Corporate Persons’ regulations, the IBBI has allowed the RP to hand over the possession of property to home buyers, after obtaining approval of the committee of creditors (COC) and upon fulfilment of all obligations by the homeowner, an official release said on Tuesday.
Experts say these changes, being specifically aimed at the real estate sector resolution, would not only increase the resolution rate and maximise returns, but also would facilitate timely resolutions without value erosion.
As of June 2024, approximately 1,400 real estate and construction companies had entered the insolvency resolution process under the IBC. Among them, 645 companies were successfully resolved through withdrawals, resolution plans, or process closures, while 261 companies underwent liquidation. At present, around 500 real-estate companies are pending resolution under IBC, which includes Jaypee Associates, Supertech, Ajnara Realtech etc.
Through the changes, the IBBI has now empowered CoCs to relax certain conditions for associations or groups of homebuyers to participate as resolution applicants in the insolvency resolution process. These include relaxations in eligibility criteria, performance security, and deposits for submitting resolution plans.
Additionally, the CoC can now invite relevant land authorities such as NOIDA, HUDA etc. to their meetings for inputs and perspectives on regulatory and land development-related matters, which would not only enhance the viability and feasibility of resolution plans but also build confidence among homebuyers and other stakeholders in the resolution process, said the IBBI.
Further, the RPs must now prepare a detailed report on the status of development rights, approvals, and permissions for real estate projects within 60 days of insolvency commencement; and must disclose the corporate debtor’s registration status as a micro, small, or medium enterprise. “This will encourage greater participation of potential resolution applicants as they can avail benefits and relaxations available for MSMEs under the Code,” said the IBBI.
Anjali Jain, partner, Areness noted that these amendments aimed at ensuring enhanced participation of land authorities and Real Estate Regulatory Authority (RERA) representatives in the insolvency proceedings, along with relaxing eligibility requirements for allottees, would pave the way for seamless resolution of distressed projects.
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