Home Buyers to Get Possession During Insolvency Resolution: IBBI
As of June 2024, around 1,400 real estate and construction firms have entered the insolvency resolution process under the IBC. The Insolvency and Bankruptcy Board of India (IBBI) has introduced new rules to aid homebuyers.
IbbiReal EstateInsolvency ResolutionHomebuyersIbcReal EstateFeb 05, 2025
This move has been welcomed by experts, who believe it will not only increase the resolution rate and maximize returns but also facilitate timely resolutions without value erosion.
Through amendments to the ‘Insolvency Resolution Process for Corporate Persons’ regulations, the IBBI has enabled RPs to transfer property possession to home buyers after obtaining approval from the committee of creditors (COC) and upon fulfillment of all obligations by the homeowner.
These changes are specifically aimed at the real estate sector and are expected to streamline the resolution process.
As of June 2024, approximately 1,400 real estate and construction companies had entered the insolvency resolution process under the IBC.
Among these, 645 companies were successfully resolved through withdrawals, resolution plans, or process closures, while 261 companies underwent liquidation.
Currently, around 500 real estate companies are still pending resolution under the IBC, including notable firms such as Jaypee Associates, Supertech, and Ajnara Realtech.
The IBBI has also empowered the CoCs to relax certain conditions for associations or groups of homebuyers to participate as resolution applicants in the insolvency resolution process.
This includes relaxations in eligibility criteria, performance security, and deposits for submitting resolution plans.
Additionally, the CoC can now invite relevant land authorities, such as NOIDA and HUDA, to their meetings to provide input on regulatory and land development-related matters.
These measures are designed to enhance the viability and feasibility of resolution plans and build confidence among homebuyers and other stakeholders.
Furthermore, RPs are now required to prepare a detailed report on the status of development rights, approvals, and permissions for real estate projects within 60 days of insolvency commencement.
They must also disclose the corporate debtor’s registration status as a micro, small, or medium enterprise.
This transparency will encourage greater participation of potential resolution applicants, as they can avail of benefits and relaxations available for MSMEs under the Code.
Anjali Jain, a partner at 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.
Bikash Jhawar, a senior partner at Saraf and Partners, added, ‘The proposed changes are positive for real estate.
Homebuyers have diverse interests, necessitating different spokespersons, and recognizing this is a positive step.’
Frequently Asked Questions
What is the Insolvency and Bankruptcy Board of India (IBBI)?
The Insolvency and Bankruptcy Board of India (IBBI) is a regulatory body that oversees the insolvency and bankruptcy processes in India. It aims to ensure a time-bound resolution of insolvency and bankruptcy cases and to protect the interests of all stakeholders, including homebuyers and creditors.
How many real estate companies have entered the insolvency resolution process under the IBC?
As of June 2024, approximately 1,400 real estate and construction companies have entered the insolvency resolution process under the IBC.
What are the key changes introduced by the IBBI for homebuyers?
The key changes introduced by the IBBI include allowing resolution professionals (RPs) to hand over possession of plots, flats, or buildings to homebuyers during the insolvency resolution process, with approval from the committee of creditors and upon fulfillment of all obligations by the homeowner.
What role do land authorities like NOIDA and HUDA play in the insolvency resolution process?
Land authorities like NOIDA and HUDA can now be invited to meetings of the committee of creditors (COC) to provide input on regulatory and land development-related matters, enhancing the viability and feasibility of resolution plans.
What is the significance of the detailed report on development rights and approvals?
The detailed report on development rights, approvals, and permissions for real estate projects, required to be prepared by resolution professionals within 60 days of insolvency commencement, ensures transparency and encourages greater participation of potential resolution applicants, particularly MSMEs.
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