Home buyers have to face difficult situations due to stalled real estate projects. The new proposal of IBBI (Insolvency and Bankruptcy Board of India) is expected to provide relief to such home buyers. For this, public comments have been sought till November 28.
To make the insolvency resolution process for realty projects more transparent, IBBI (Insolvency and Bankruptcy Board of India) has made it mandatory for projects to be registered under the Real Estate Regulatory Authority (RERA) and the properties to be occupied by home buyers. It is proposed to be kept out of the scope of liquidation.
Five major changes in the rules
The Insolvency and Bankruptcy Board of India (IBBI) has proposed five major changes, including operating a separate bank account for each real estate project, approval of the Committee of Creditors (CoC) during the resolution process and CoC. This includes allowing separate plans for each project and permission to examine them.
The proposed change is expected to provide relief to home buyers whose investments are stuck in real estate projects. According to the discussion paper issued by IBBI, one of the proposed changes is that wherever an allottee owns property, it cannot be part of the liquidation estate.
Registration required
Liquidation of assets is done only when the matter cannot be resolved through the Corporate Insolvency Resolution Process (CIRP). Another proposal is that the Resolution Professional (RP) will have to follow the provisions of the RERA Act and the rules made thereunder. Under RERA, it is mandatory to register or extend all real-estate projects whose registration has expired or is about to be registered.
Apart from this, IBBI has also suggested maintaining separate bank accounts for each project. This makes it easier to monitor the progress of a project and identify potential issues. Because records of receipt and payment are kept separately for each project.
The Resolution Professional (RP) will have to hand over the assets to the allottees through handover during the resolution process with the approval of the CoC. Allottees will have to pay all applicable charges or comply with all conditions of sale. Additionally, the RP can invoke a separate resolution plan for each real estate project or projects of the corporate debtor.
