Insolvency regulator IBBI proposes to roll out a slew of measures aimed at providing comfort to home buyers while speeding up the insolvency processes of real estate projects under the Insolvency and Bankruptcy Code (IBC).
It has, in a new discussion paper, come up with five new proposals including requiring IRPs/RPs to apply for project-wise registration with RERA; enabling Committee of Creditors (CoCs) to examine and invite separate plans for each project and excluding property in the possession of allottees from liquidation estate.
Resolution professionals (RPs) are also proposed to be enabled to transfer the ownership and possession of a plot/building/apartment to the allottees during the resolution process.
An option is proposed to be given to allottees to acquire real estate units on ‘as is where is’ basis or on payment of balance required to complete the unit during the resolution process.
The Insolvency and Bankruptcy Board of India (IBBI) has invited public comments — to be submitted electronically — by November 28.
These proposed changes to the Corporate Insolvency Regulation Process (CIRP) and the liquidation norms are essentially flowing out of the recommendations of the Amitabh Kant-led Committee on issues related to Legacy Stalled Real Estate Projects. This panel had recommended that “the IBC needs to be reformed to better accommodate the complexities of the real estate sector.”
These five proposals specified in the discussion paper have also factored in the recommendations of the colloquium on functioning and strengthening of the IBC ecosystem, which in November last year had suggested several measures to improve outcomes in the real estate cases.
A large number of real estate cases have remained unresolved for long period of time as the current framework of CIRP is not conducive to address the issues specific to this sector.
Ashoo Gupta, Partner, Shardul Amarchand Mangaldas & Co, said that compulsory RERA registration will promote transparency.
The amendments proposed may pose administrative challenges even as it attempts to deal with important issues in the real estate insolvency process, Gupta noted.
Hari Hara Mishra, CEO, ARC Association, said, “proposal to hand over possession and register in the name of allottee during the IBC process, where the allottee has fulfilled his obligations, on as is where is basis, will bring relief to home buyers., who need not wait till the resolution process is over.”
Manmeet Kaur, Partner, Karanjawala & Co, said the import and reliance on RERA provisions in IBC is a welcome move and will boost the development and resolution of stalled real estate projects.
It will also strengthen the IBC regime to deal with the issues relating to such real-estate projects, Kaur added.
Rohan Batra, Partner, Anagram Partners, said that mandating IRP/RPs to open separate bank accounts for each project solidifies the concept of project-wise insolvency. “In my view, it should enhance the transparency and efficiency of CIRPs for real estate allottees,” he said.
Yash Vardhan, Associate Partner, IndiaLaw LLP, said the proposed changes will yield positive results for the reason that under the current framework large number of real estate cases have not been resolved for long period of time as the said issues were not addressed.