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The Insolvency and Bankruptcy Board of India (IBBI) has amended regulations to allow resolution professionals (RPs) to grant possession of homes to buyers during the insolvency resolution process, with approval from the Committee of Creditors (CoC). This move aims to protect homebuyers' interests, improve resolution rates, and prevent property devaluation. With 500+ real estate firms undergoing insolvency, the amendments also enable homebuyer groups to bid for stalled projects and allow regulatory land bodies like NOIDA and HUDA to participate in CoC meetings. Legal experts welcome the change but stress the need for strong safeguards and clear guidelines to ensure effective implementation.
In a move aimed at providing relief to homebuyers, the Insolvency and Bankruptcy Board of India (IBBI) has allowed resolution professionals (RPs) to grant possession of plots, flats, or buildings to homeowners even as the insolvency resolution process continues. Advertisement
Through amendments to the 'Insolvency Resolution Process for Corporate Persons' regulations, the IBBI has empowered RPs to transfer possession to homebuyers, subject to approval from the Committee of Creditors (CoC) and the fulfilment of all required obligations by the homeowner.
Industry experts believe these amendments, specifically targeted at real estate insolvency resolutions, will not only improve resolution rates and maximise returns but also ensure timely resolutions without diminishing property value.
As of mid-2024, approximately 1,400 real estate and construction companies have undergone the insolvency resolution process under the Insolvency and Bankruptcy Code (IBC). Among them, 645 firms have been successfully resolved through withdrawals, resolution plans, or process closures, while 261 have gone into liquidation. Presently, around 500 real estate firms, including Jaypee Associates, Supertech, and Ajnara Realtech, are still pending resolution under the IBC framework.
The latest amendments also empower CoCs to ease certain requirements for homebuyer associations and groups to participate as resolution applicants. These relaxations include adjustments to eligibility criteria, performance security, and deposit requirements for submitting resolution plans.
Additionally, CoCs now have the authority to invite regulatory land bodies such as NOIDA and HUDA to their meetings. This inclusion aims to offer insights into land development and regulatory matters, enhancing the feasibility of resolution plans while boosting confidence among homebuyers and stakeholders, according to the IBBI.
Moreover, resolution professionals must now submit a detailed report on the status of development rights, approvals, and permissions within 60 days of the insolvency commencement. They must also disclose whether the corporate debtor is registered as a micro, small, or medium enterprise (MSME), ensuring greater participation from potential resolution applicants who may benefit from MSME-specific relaxations under the Code.
Legal experts, however, remain divided on the implications of these changes. While some welcome the initiative to address real estate insolvencies, concerns persist about the potential legal complexities and risks. Some experts warned that without stronger safeguards, clear implementation guidelines, and mechanisms prioritising homebuyers' interests, the amendments might prove ineffective.
The recent amendments by the IBBI mark a significant development in the real estate insolvency landscape, offering hope to homebuyers awaiting possession of their properties. By enabling resolution professionals to transfer ownership during the insolvency process, these changes aim to ease financial burdens and streamline resolution proceedings. Moving forward, effective implementation will be crucial in ensuring that these reforms genuinely benefit homebuyers and contribute to a more efficient insolvency resolution framework.
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