The Insolvency and Bankruptcy Board of India (IBBI) has proposed five broad changes, including operating a separate bank account for each real estate project, executing registration/sublease deeds with approval of the Committee of Creditors (CoC) during the resolution process and allowing CoC to examine and invite separate plans for each project.
To address issues faced in the insolvency resolution process for realty projects, IBBI has proposed mandatorily registering of projects under the Real Estate Regulatory Authority and keeping properties that are in the possession of homebuyers from the ambit of liquidation. The Insolvency and Bankruptcy Board of India (IBBI) has proposed five broad changes, including operating a separate bank account for each real estate project, executing registration/sublease deeds with approval of the Committee of Creditors (CoC) during the resolution process and allowing CoC to examine and invite separate plans for each project.
The proposed amendments, for which public comments have been sought till November 28, are expected to provide relief for homebuyers whose investments are stuck in stalled real estate projects. One of the proposed amendments is that wherever an allottee is in possession of a property, that cannot be a part of the liquidation estate, according to the discussion paper floated by the IBBI.
Liquidation of assets are done only if the Corporate Insolvency Resolution Process (CIRP) is not successful. Another proposal is that the Resolution Professional (RP) must comply with the provision of the RERA Act and regulations framed thereunder as it is mandatory to register all real-estate projects under RERA or to extend the registration, wherein the registration is expired or about to expire.
Further, the IBBI has suggested maintaining separate bank accounts for each project as tracking the progress and identifying potential issues with a project becomes easier as there are receipts and payments that are recorded separately for each project. For units on ‘as is where is’ basis, the smooth handover of units should be ensured to the rightful homebuyers and delays and hold-ups should be avoided, as per the discussion paper.
The RP is to handover the property to allottees through transfer during the resolution process with the approval of the CoC, which constitutes 60 per cent of total votes, where the allottees are required to pay all applicable charges or do all the compliances as per the terms of sale. Also, the RP may invite a separate resolution plan for each real estate project or group of projects of the corporate debtor as it is often seen that some resolution applicants are not interested in all projects and want to undertake some specific projects, the discussion paper said.
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