IBBI Proposes Key Reforms to Streamline Real Estate Insolvency Processes Under IBC Rules

The Insolvency and Bankruptcy Board of India (IBBI) has suggested reforms to improve the insolvency process for real estate firms and better protect stakeholders. These changes aim to make real estate insolvency proceedings more efficient under the Insolvency and Bankruptcy Code (IBC) rules.

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In a recent discussion paper, IBBI proposed including land authorities in Committee of Creditors (CoC) meetings as invitees without voting rights. Currently, only financial creditors are represented in the CoC, excluding land authorities who play a vital role in real estate projects. Their inclusion is expected to clarify regulatory compliance and enhance resolution plan feasibility.

Enhancing Transparency and Communication

The IBBI also addressed issues related to cancelled land allotments in insolvency cases. It suggested that resolution professionals should report such cancellations to the CoC. This would allow stakeholders to decide whether to pursue liquidation or continue with the resolution process.

To improve communication, the board recommends allowing multiple facilitators for creditor representation in cases with many creditors. This measure aims to enhance communication and representation among creditors.

Streamlining Processes and Ensuring Transparency

For better transparency, IBBI proposed that CoC meeting minutes for real estate projects be accessible to all creditors through a secure online system. This step is intended to counter rumours and misinformation by providing clear information.

The paper also suggested changes to streamline the possession handover process for real estate projects. Resolution professionals could transfer ownership to homebuyers who have met their financial obligations, pending CoC approval.

Seeking Stakeholder Feedback

The IBBI has invited stakeholders to comment on these proposals by November 27. After reviewing feedback, the board plans to establish rules under section 196 of the code.

These proposed reforms aim to make real estate insolvency proceedings more transparent and efficient, benefiting all involved parties. By including land authorities in discussions and improving communication, the IBBI seeks to enhance decision-making processes.