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
West Chennai Sees Unprecedented Boom in Luxury Housing due to Metro Connectivity
Discover how the upcoming metro connectivity is driving the demand for luxury housing in West Chennai, with sales witnessing a significant increase in the high-end segment.
MSN Realty Launches Luxury Residential Project 'One by MSN' in Hyderabad
MSN Realty, the prominent real estate arm of the MSN Group, has announced the launch of its first luxury residential project, 'One by MSN', in Hyderabad. The project promises to redefine luxury living with its premium amenities and strategic location.
The Fern Hotels & Resorts Expands with New Openings in Dehradun and Pune
The Fern Hotels & Resorts, a leading hospitality chain in India, is set to boost its presence with the opening of two new hotels in Dehradun and Pune. This expansion reflects the company's commitment to providing quality accommodation and services across strategic locations in India.
Hyderabad: The Fastest Growing City Driven by Real Estate Boom
Hyderabad has emerged as the fastest-growing city in India, largely driven by its booming real estate sector. This report delves into the socioeconomic and physical infrastructure factors that have contributed to the city's rapid growth and development.
The Rise of Deepfake Scams: A Mumbai Doctor Loses Rs 7 Lakh to a Bogus Trading Academy
A Mumbai-based doctor falls prey to a deepfake video of Mukesh Ambani, resulting in a loss of Rs 7 lakh in a stock market scam.
Paul Richards, CFO of NexPoint Real Estate Finance, Purchases $12,280 in Stock
NexPoint Real Estate Finance's CFO, Paul Richards, has made a significant stock purchase, acquiring shares worth $12,280. This move comes as the company continues to navigate the dynamic real estate market and seeks to strengthen its financial position.