In a bid to streamline real estate insolvency procedures, the government has unveiled a discussion paper about mitigating challenges encountered during corporate insolvency resolution processes (CIRPs).
The discussion paper, released on 6 November 2023, delves into mandatory registration and extension of projects under the Real Estate Regulatory Authority (RERA), the necessity for separate bank accounts for each real estate project, and the execution of registration/sublease deeds with the approval of the committee of creditors (CoC) during the CIRP.
The government’s proposals align with recommendations from the Amitabh Kant Committee Report on real estate projects. These proposals advocate project-specific resolution mechanisms and suggest amendments to the Insolvency and Bankruptcy Code, 2016 (IBC), to better accommodate the real estate sector’s complexities.
The proposed amendments include enforcing RERA compliance during the CIRP, mandating separate bank accounts for individual projects undergoing insolvency, and specifying regulations for executing registration/sublease deeds with CoC approval.
Additionally, the proposals emphasise the importance of inviting separate resolution plans for each real estate project, tailored to address project-specific complexities.
A notable recommendation seeks to exclude properties in possession of homebuyers from the liquidation estate, safeguarding their interests in cases of insolvency. The government invited public comments until 28 November 2023.
