Home Buyers to Get Possession During Real Estate Insolvency Resolution Process: IBBI
The Insolvency and Bankruptcy Board of India (IBBI) has introduced significant changes to allow resolution professionals (RP) to hand over possession of properties to homebuyers during the insolvency resolution process. These changes aim to streamline the
IbbiReal EstateInsolvency ResolutionHomebuyersCocReal Estate MumbaiFeb 05, 2025
These amendments, aimed at the real estate sector, will allow resolution professionals (RP) to hand over possession of plots, flats, or buildings to homebuyers even while the resolution process is ongoing.
According to an official release, the IBBI has amended the 'Insolvency Resolution Process for Corporate Persons' regulations.
This amendment enables the RP to transfer possession of the property to homebuyers after obtaining approval from the Committee of Creditors (COC) and upon fulfillment of all obligations by the homeowner.
These changes are expected to increase the resolution rate, maximize returns, and facilitate timely resolutions without value erosion.
Experts are optimistic about these changes.
Anjali Jain, partner at Areness, stated, “These amendments will ensure enhanced participation of land authorities and Real Estate Regulatory Authority (RERA) representatives in the insolvency proceedings.
This will help in creating more feasible and viable resolution plans, building confidence among homebuyers and other stakeholders.”
As of June 2024, approximately 1,400 real estate and construction companies had entered the insolvency resolution process under the Insolvency and Bankruptcy Code (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 pending resolution under IBC, including major names like 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.
These relaxations include eligibility criteria, performance security, and deposits for submitting resolution plans.
This move is expected to encourage a higher number of homebuyers to participate in the resolution process, thereby speeding up the resolution of distressed projects.
Additionally, the CoC can now invite relevant land authorities such as NOIDA, HUDA, and others to their meetings for insights on regulatory and land development-related matters.
According to the IBBI, this will not only enhance the viability and feasibility of resolution plans but also build confidence among homebuyers and other stakeholders.
Resolution professionals (RP) 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 the insolvency commencement.
They must also disclose the corporate debtor’s registration status as a micro, small, or medium enterprise (MSME).
This will encourage greater participation of potential resolution applicants as they can avail of the benefits and relaxations available for MSMEs under the Code.
Bikash Jhawar, senior partner at Saraf and Partners, commented, “The proposed changes are positive for the real estate sector.
Homebuyers have diverse interests, and recognizing this need for different spokespersons is a significant step forward.
This will help in making the resolution process smoother and more transparent.”
These changes by the IBBI are a significant step towards providing relief to homebuyers and improving the overall efficiency of the insolvency resolution process in the real estate sector.
Frequently Asked Questions
What is the new change introduced by the IBBI for homebuyers?
The IBBI has amended the 'Insolvency Resolution Process for Corporate Persons' regulations to allow resolution professionals to hand over possession of plots, flats, or buildings to homebuyers during the insolvency resolution process, provided the Committee of Creditors approves it and the homeowner fulfills all obligations.
How many real estate companies are currently under the insolvency resolution process?
As of June 2024, around 500 real estate companies are pending resolution under the Insolvency and Bankruptcy Code (IBC).
What relaxations are provided to homebuyers in the new process?
The Committee of Creditors (COC) can now relax eligibility criteria, performance security, and deposits for homebuyers to participate as resolution applicants. This is aimed at encouraging more homebuyers to participate in the resolution process.
Why is the involvement of land authorities important in the resolution process?
The involvement of relevant land authorities such as NOIDA and HUDA provides valuable insights on regulatory and land development-related matters. This helps in enhancing the viability and feasibility of resolution plans and building confidence among homebuyers and stakeholders.
What is the role of the Resolution Professional (RP) in the new process?
The RP is required to prepare a detailed report on the status of development rights, approvals, and permissions for real estate projects within 60 days of the insolvency commencement. They must also disclose the corporate debtor’s registration status as an MSME, which can help potential resolution applicants avail of benefits and relaxations available for MSMEs.
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