So far, 21% of cases admitted for insolvency resolution in the National Company Law Tribunal (NCLT) relates to the real estate sector, but their share in resolutions is around 15%, with cases – including high profile ones – dragging on for years and hurting the interests of homebuyers.
Following discussions with stakeholders and the recommendations of the Amitabh Kant committee set up by the ministry of housing and urban affairs, the IBBI has suggested that every resolution professional, the designated officer appointed by NCLT to manage the affairs, must register each project under RERA and also operate separate bank accounts for each one.
If the suggestions are accepted, a bigger relief awaits homebuyers, who have paid the full amount and occupied units or have taken possession with the paper proposing transfer or rights, wherever the committee of creditors (CoC) agrees to do so. In several housing projects, there are no lenders and only homebuyers are members of the committee of creditors – which votes on all key matters.
“Further, to avoid delays due to unnecessary hold-ups, it is also proposed that with the approval of the CoC, RP may also be permitted to hand over the possession of units to the allottees on ‘as is where is’ basis or on payment of balance amount, if any, after taking in to account the funds due and funds required for completing the unit,” it said.
Besides, IBBI has proposed that properties where the “allottee” has taken possession should be excluded from the liquidation estate. The move has been necessitated by the multiple court rulings, some of which are at variance with each other and often create confusion.
The insolvency board has also suggested that resolution professionals should invite separate resolution plans for each project as several companies that face insolvency action have multiple projects. The move is aimed at simplifying the resolution process as projects are at multiple stages of development and a large project may not see sufficient interest. Most of the changes proposed by IBBI for the real estate sector can be undertaken through amendments to its regulations even as there are several amendments to the law that are planned. While the Bill has been drafted, the government has not moved ahead with introducing it in Parliament.