India plans to introduce new rules for handling real estate bankruptcies, which would help homebuyers even as their builders wind down, people familiar with the matter said.
The proposed change to the nation’s Insolvency and Bankruptcy Code will permit resolution of the cases on a project-wise basis, the people said, asking not to be named, as the information is not public. That will allow handing over completed apartments to the home buyers even when the developer’s insolvency process is underway, they said.
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A spokesperson for the corporate affairs ministry declined to comment.
The realty sector has seen many builders going bust over the years, leaving home buyers in a fix due to the uncertainty of completion and delivery of houses that their life savings were tied up in. Under the current norms, admission into insolvency procedure halts the completion of all projects of the developer in default.
As of June this year, 436 out of the pending 1,999 cases of corporate insolvency were in the real estate sector, Minister of State for Corporate Affairs Inderjit Singh Rao had informed the lawmakers in August. The IBC had little success in the timely resolution of such cases, making the need for a special framework to address the nuances of the real estate sector more pronounced.
To speed up the resolutions, the government also plans to introduce a centralised platform for registration of cases, simplify pre-packaged resolution plans, and provide flexible plans for handling operational and nonviable assets separately, they said.