Real Estate Insolvencies: IBC Rescues 2.5 Times More Companies Than Liquidated
The Insolvency and Bankruptcy Code (IBC) has led to successful resolution of 46% cases admitted in the real estate sector, with 645 companies rescued and 261 ending up in liquidation.
Real EstateInsolvencyBankruptcyIbcIbbiKing Stubb KasivaAdvocates And AttorneysReal EstateAug 14, 2024
This is a significant achievement, with the rescued companies being around 2.5 times of those liquidated. Ravi Mittal, chairperson of IBBI, noted that the IBC has instilled a sense of hope among stakeholders by providing a structured framework for insolvency resolution, empowering homebuyers, and ensuring a time-bound process.
The Economic Survey 2023-24 highlighted that the IBC has been the most favored remedy for the real estate sector, ahead of the Consumer Protection Act 2019 and the Real Estate Regulation and Development Act 2016. Large-sized real estate cases, such as Jaypee Infratech, Kohinoor CTNL Infrastructure Company, and SARE Gurugram, have yielded recoveries of more than 60%.
However, IBC experts feel that despite the positive trend, several challenges persist. The resolution process remains lengthy, often delayed by complex stakeholder dynamics, asset valuation disputes, and regulatory hurdles. The lack of specialized knowledge among insolvency professionals and the need for greater protection of homebuyer interests continue to complicate matters.
To address these challenges, several steps have been taken in the last few years to accommodate the unique requirements of real estate insolvency. These include giving homebuyers the status of financial creditors, keeping units already in possession out of the liquidation process, allowing project-wise insolvency resolution, and making homebuyers resolution applicants.
Despite the challenges, the IBBI chief noted that the IBC's success in resolving high-profile real estate cases highlights its potential to bring positive change to the sector.
For the overall corporate insolvency resolution process, till June 2024, creditors had realized Rs 3.4 trillion from resolution plans, a recovery of 32% against the total admitted claims having a haircut of about 68%.
The IBBI is a key regulator of the insolvency and bankruptcy ecosystem in India, responsible for implementing the IBC. The IBC is a comprehensive legislation that provides a structured framework for insolvency resolution, empowering creditors to take control of a company's assets and operations.
King Stubb & Kasiva, Advocates and Attorneys, is a leading law firm that specializes in insolvency and bankruptcy law. Gauri Jagtap, associate partner at the firm, noted that the IBC has been a game-changer for the real estate sector, but there is still a need for ongoing refinement of the framework and improved coordination among stakeholders.
The Real Estate Regulation and Development Act 2016 is a legislation that regulates the real estate sector, providing protections for homebuyers and ensuring transparency and accountability in the sector.
The Consumer Protection Act 2019 is a legislation that provides protections for consumers, including homebuyers, and ensures that companies are held accountable for their actions.
Frequently Asked Questions
What is the Insolvency and Bankruptcy Code (IBC)?
The IBC is a comprehensive legislation that provides a structured framework for insolvency resolution, empowering creditors to take control of a company's assets and operations.
How many real estate companies have been rescued under the IBC?
As of June 2024, 645 real estate companies have been rescued under the IBC.
What is the recovery rate for creditors under the IBC?
For the overall corporate insolvency resolution process, till June 2024, creditors had realized Rs 3.4 trillion from resolution plans, a recovery of 32% against the total admitted claims having a haircut of about 68%.
What are the challenges faced by the IBC in resolving real estate insolvencies?
The resolution process remains lengthy, often delayed by complex stakeholder dynamics, asset valuation disputes, and regulatory hurdles. The lack of specialized knowledge among insolvency professionals and the need for greater protection of homebuyer interests continue to complicate matters.
What steps have been taken to address the unique requirements of real estate insolvency?
Several steps have been taken, including giving homebuyers the status of financial creditors, keeping units already in possession out of the liquidation process, allowing project-wise insolvency resolution, and making homebuyers resolution applicants.
Related News Articles
Keystone Realtors Raises Rs 800 Crore from Institutional Investors
Mumbai-based Keystone Realtors has raised Rs 800 crore by selling shares to institutional investors
Kerala Police Hand Over Mami Missing Case to Crime Branch to Avoid CBI Probe
The Kerala police have handed over the missing case of Mohammad Attur, a prominent real estate businessman, to the Crime Branch to prevent a CBI investigation.
Home Sales in Noida and Greater Noida Increase by 6% in Q3 2024
The residential property market in Noida and Greater Noida witnessed a 6% surge in registrations during the July-September quarter, with a total of 8,128 units sold, according to real estate consultant Square Yards.
Mumbai Real Estate Market Sees Significant Growth in 2024 with 1.41 Lakh Registrations
Mumbai's real estate market is on track to register 1,41,302 property registrations in 2024, marking an 11% increase from the previous year. The market is showing resilience and a growing preference for premium and spacious homes.
2025 Outlook: The Future of Commercial Real Estate in Tier-II and Tier-III Cities
In 2025, we can expect a significant rise in commercial real estate activity in Tier-II and Tier-III cities across India, driven by factors such as low operating costs, ample space, skilled talent, and infrastructure development.
Maharashtra's Transport Minister Pratap Sarnaik Invites CREDAI to Develop MSRTC Land
The Maharashtra Transport Minister, Pratap Sarnaik, has called on the Confederation of Real Estate Developers’ Associations of India (CREDAI) to participate in the development of 1,360 hectares of land owned by the Maharashtra State Road Transport Corpora