IBBI proposes more reforms to streamline real estate insolvency processes
A significant overhaul of India’s insolvency and bankruptcy code (IBC) is on the horizon, with a particular focus on real estate projects. The proposed amendments aim to address critical issues faced by stakeholders, including homebuyers, financial creditors, and land authorities, in the resolution of distressed real estate companies.
Key Proposals:
- Inclusion of Land Authorities in CoC Meetings:
- Rationale: To ensure that land-related issues and regulatory requirements are adequately considered in the resolution process.
- Proposal: Land authorities will be invited as special invitees to CoC meetings, without voting rights.
- Addressing Land Allotment Cancellations:
- Rationale: To provide clarity and a structured approach to situations where land allotments are cancelled before the insolvency commencement date.
- Proposal: Insolvency professionals will be required to report such cancellations to the CoC and the Adjudicating Authority.
- Facilitating Allottee Participation:
- Rationale: To empower allottee associations to actively participate in the resolution process.
- Proposal: The CoC will have the discretion to relax eligibility criteria, earnest money deposit, and performance security requirements for allottee associations.
- Clarifying Notional Interest for Homebuyers:
- Rationale: To ensure consistent treatment of notional interest in the calculation of homebuyers’ claims.
- Proposal: The 8% per annum interest rate will be considered for both voting share calculations and claim valuation.
- Appointing Facilitators for Large Creditor Classes:
- Rationale: To improve communication and representation for large creditor classes.
- Proposal: Facilitators may be appointed to assist in these situations.
- Expediting Possession Handover:
- Rationale: To streamline the process of transferring ownership and possession of units to homebuyers.
- Proposal: Insolvency professionals will be empowered to hand over ownership or possession of units with the approval of the CoC.
These proposed amendments are expected to significantly enhance the efficiency and effectiveness of real estate insolvency resolutions, benefiting all stakeholders involved. By addressing specific pain points and streamlining the process, these reforms aim to promote timely resolution and protect the interests of homebuyers and other creditors.
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