19 February 2024 – Recent amendments to the insolvency law by the Insolvency and Bankruptcy Board of India (IBBI) have garnered praise from real estate developers. The regulatory changes allow for a project-wise insolvency and liquidation process in the real estate sector, aiming to expedite resolutions and offer relief to various stakeholders.
Impact of Amendments:
The key amendment empowers the Committee of Creditors (CoC) to invite separate resolution plans for each real estate project, streamlining the process and avoiding the inclusion of the entire firm in insolvency proceedings. The IBBI’s decision to keep allotted real units out of the liquidation process is seen as a positive step, providing relief to homebuyers.
Niranjan Hiranandani, Managing Director of Hiranandani Group, expressed optimism about the recent changes, highlighting the benefits for stakeholders, including homebuyers and developers. The shift to project-wise insolvency enhances the chances of settling debt and increasing recoveries for creditors, according to Hiranandani.
Alignment with RERA Guidelines:
Analysts note that the amendments align with Real Estate Regulatory Authority (RERA) guidelines, emphasizing the importance of maintaining differentiation at the insolvency resolution stage, consistent with the pre-insolvency monitoring of each project as a separate unit.
Sunil Pareek, Executive Director of Assetz Property Group, emphasized the power given to Resolution Professionals (RPs) to adopt a tailor-made approach for each project. This approach is expected to lead to faster-targeted resolutions, minimizing value erosion in stressed projects and ensuring timely home deliveries.
Dishant Malik’s Perspective:
Dishant Malik, Founder & CEO of Realsta, anticipates relief for developers, homebuyers, and creditors. He views the amendments as a catalyst for faster resolution of stalled projects, reducing delays, and providing greater confidence to homebuyers regarding timely project completion.
The amended rules also mandate the RP to open separate bank accounts for each real estate project, ensuring financial transparency. Additionally, the CoC can establish a monitoring committee to oversee the implementation of the resolution plan. Siddharth Mody, Partner at J. Sagar Associates (JSA), believes this dedicated body will safeguard homebuyers’ interests and control unnecessary expenditures.
Conclusion:
The regulatory amendments are poised to bring positive changes to the real estate sector, fostering efficiency, transparency, and targeted resolutions. Stakeholders welcome these developments as a step toward expediting the resolution of stalled projects and instilling confidence in the real estate market.
