The Insolvency and Bankruptcy Board of India (IBBI) has introduced a proposal aimed at improving the resolution process for distressed real estate firms. This initiative comes in response to the number of insolvency cases within the sector. The proposal seeks to expedite ownership transfers to buyers who have settled their dues and are already residing in their properties. This change could greatly benefit numerous homebuyers facing delays in registration.
Key Proposals by IBBI
The IBBI’s discussion paper outlines several key proposals. First, it suggests that homebuyers who have paid all dues should be granted ownership of their units, pending approval from the committee of creditors (CoC). This measure aims to streamline the resolution process.
Role of Committee of Creditors
The CoC plays a very important role in the insolvency process. It is primarily composed of homebuyers, who are classified as financial creditors. The IBBI proposes that the CoC allow resolution professionals to transfer possession of units to allottees on an “as is where is” basis. This would enable a faster resolution while considering any outstanding payments.
Addressing Delays in Registration
Delays in the registration of properties have been an important concern for homebuyers. The IBBI’s proposal aims to mitigate these delays by facilitating quicker ownership transfers. This change is expected to enhance the overall experience for homebuyers and reduce the backlog in the system.
Inclusion of Stakeholders
The IBBI has recommended including land and other competent authorities as invitees to CoC meetings. While they will not have voting rights, their presence could provide valuable insights. This inclusion is intended to ensure that all relevant parties are considered in the decision-making process.
Empowering Homebuyers
To further empower homebuyers, the IBBI has suggested allowing associations of allottees to participate as resolution applicants. This change aims to improve representation and communication among creditors. The IBBI also proposes appointing facilitators to assist large groups of creditors.
Interest Claims in Rescue Plans
The IBBI has clarified that the provision of interest at 8% per annum should be included in claims for rescue plans. This measure is designed to ensure that homebuyers receive fair compensation during the resolution process.
Stakeholder Feedback
The IBBI has invited stakeholder comments on these proposals by November 27. This feedback will be crucial in shaping the final regulations.
Questions for UPSC:
- Critically analyse the role of the Committee of Creditors in the insolvency resolution process for real estate firms.
- Estimate the potential impact of IBBI’s proposals on homebuyers in India.
- What are the implications of including land authorities in the Committee of Creditors meetings? Discuss.
- With suitable examples, evaluate how the proposed changes could streamline the insolvency process in the real estate sector.
