 "Include land authority in CoC for real estate insolvency cases: IBBI")
The inclusion of land authorities such as Real Estate Regulatory Authority (RERA) in the committee of creditors (CoC) to get their inputs without granting them voting rights for real estate insolvency process is among the several suggestions proposed by the Insolvency and Bankruptcy Board of India (IBBI) on Thursday.
The insolvency regulator, in a discussion paper on issues related to the real estate sector said, “From a stakeholder perspective, the presence of such competent authorities in CoC meetings can enhance transparency and build confidence among homebuyers and other stakeholders in the resolution process.”
In order to allow associations of home allottees participate in the resolution process, IBBI has proposed to bring an explanation stating the powers of CoC to use its discretion and relax certain conditions for such associations.
"The changes proposed are on a wide range of issues which will act as an enabler for better outcomes for all the stakeholders.
The inclusion of land authorities as non-voting members of COC will provide more confidence and they can act as facilitators for the final resolution," said Jyoti Prakash Gadia, Managing Director at Resurgent India.
To facilitate the smooth handover of occupied units or where possession has been transferred to home buyers, IBBI has proposed allowing the resolution professional to handover the ownership of a plot, apartment, or building to the allottees through transfer during the resolution process, with the approval of CoC.
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The discussion paper has proposed allowing the appointment of facilitators for large classes of creditors to improve communication and representation.
The allottees of real estate projects, IBBI has proposed, should also be given access to minutes of meeting of CoC in real estate insolvency to ensure they stay informed about project developments.
The IBBI has proposed to include a provision in its regulations requiring the Insolvency Professional to report to the CoC and Adjudicating Authority when land allotment has been cancelled and possession taken back by authorities before the insolvency commencement date.
The Board seeks to issue a clarification that the provision of interest at 8 per cent per annum on homebuyer’s claims should also be considered as part of the claim for the purpose of resolution plans and distribution of amount.
IBBI has invited comments to its proposals by November 27, 2024.
The Economic Survey 2023-24 noted that the IBC has been the most favoured among the three available remedies for the real estate sector, besides the Consumer Protection Act 2019 and Real Estate Regulation and Development Act 2016.
According to IBBI large size real estate cases such as Jaypee Infratech, Kohinoor CTNL Infrastructure Company, SARE Gurugram have yielded recovery of more than 60 per cent of the admitted claims.
The Insolvency and Bankruptcy Code has seen successful resolution in 46 per cent of the cases admitted in the real estate sector as of June 2024, IBBI data showed.
Of the 1,400 admitted insolvency cases for real estate and construction companies, 645 have so far been rescued while 261 ended up in liquidation.
“By providing a structured framework for insolvency resolution, empowering homebuyers and ensuring time-bound process, IBC has instilled a sense of hope and confidence among stakeholders,” said Ravi Mittal, chairperson IBBI said in the April-June newsletter.