In a discussion paper, the Insolvency and Bankruptcy Board of India (IBBI) has also suggested that flats under possession be excluded from the assets that will be liquidated if an insolvent project doesn’t see resolution. It proposes to extend such a relief to homebuyers by tweaking the section 36 of the Insolvency and Bankruptcy Code (IBC) that defines the “liquidation estate”.
The proposals assume importance, as they seek to not just expedite resolution of insolvent realty projects but also provide relief to homebuyers threatened with the prospect of seeing their money going up in smoke when builders fail.
“After obtaining the approval of the committee with not less than 66% of total votes, the resolution professional, shall: (1) hand over the possession of the plot, apartment, or building or any instruments agreed to be transferred under the real estate project where the allottee has performed his part under the agreement, and facilitate registration; or (2) provide an option to the allottees to acquire such units or on payment of balance required to complete the unit during the process,” the regulator has suggested in the paper.
The units that are under possession of the allottees won’t be part of the assets of the stressed real estate developer, it said.
“Further, to avoid delays due to unnecessary holds-ups, it is also proposed that with the approval of the CoC, RP may also be permitted to hand over the possession of units to the allottees on ‘as is where is’ basis or on payment of balance amount, if any, after taking in to account the funds due and funds required for completing the unit,” the regulator said in the paper.The IBBI has also proposed to mandatory for insolvency professionals to get all stressed projects registered with the Real Estate Regulatory Authority (RERA). Where the registration is about to expire, they can apply to extend it.The insolvency professionals must also operate a separate bank account for each stressed project that is being resolved under the Insolvency and Bankruptcy Code (IBC), the regulator said. This could be a precursor to a proposed move to restrict the invocation of the IBC to only bankrupt projects instead of the current practice of extending it to the entire real estate company.
The regulator also intends to clarify that the CoC may direct the RP to invite separate resolution plans for each project or group of projects. “It would also encourage the association of allottees of a real estate project to bring their own resolution plan and resolve issues in a specific project,” it said.
The IBBI has sought stakeholder comments by November 28.
According to the IBBI data, real estate accounted for 21% of the admitted cases until September 2023 but only 15% of the resolved ones.
Several real estate developers, including Jaypee, Unitech, Amrapali, Today Homes, Supertech, Logix and Ajnara, are facing insolvency proceedings.
