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bankruptcy and bankruptcy cases Despite several complications including a large number of distressed homebuyers, real estate companies have seen steady progress in terms of solutions.
Experts said the performance is likely to get a further boost from the government likely to bring in changes to the code to allow resolution based on the nature of projects instead of prescribing a rigid framework for the entire property sector.
Latest data from the Insolvency and Bankruptcy Board of India (Insolvency and Bankruptcy Board of India) shows that a total of 6,571 companies across various sectors were brought into administration by the end of March this year.IBBI,
Of these cases, about 21% or 1,380 companies were from the real estate sector and of these, 854 or about 62% companies have seen a successful resolution plan since the inception of the Insolvency and Bankruptcy Code (IBC) in 2016. “The issues and challenges in insolvency resolution of any real estate project or developer are different from any other sector as it involves homebuyers as operational creditors. needs to be post-analysed. A customized code will help resolve issues at a faster pace, said Jaxay Shah, former chairman of CREDAI. Builder Dignity Buildcon.
Similarly, on April 24, the NCLT had also approved the revival plan for entire Gurugram. The company had accepted liabilities of over Rs 2,112 crore and lenders and the tribunal approved the consortium of KGK Realty and Dhoot Infrastructure Projects’ plan.
These are not isolated examples, but a growing trend of buyers and investors looking to acquire bankrupt realty firms from the insolvency resolution process in order to turn it around and also make some profit in the process.
Most of the stressed realty developers facing the insolvency resolution process are from metro cities where it is very difficult to get prime land parcels. This is fueling the interest of bidders in bankrupt realty companies to acquire them at discounted prices.
“There are instances where real estate companies are facing bankruptcy due to project delay or delay in getting approvals or cost overrun or non-availability of funds, but many investors are reluctant to invest in such projects keeping the future in mind. Ready.” NPS Chawla is the co-founder of Acom Legal, a New Delhi based law firm.
According to him, in many projects where companies have gone bankrupt, the allottees themselves have joined hands and are completing the projects under the pool and build mechanism.
Interestingly, of the 678 companies that were rescued through the approval of revival plans, nearly a quarter or 164 companies were from the real estate and construction sector. However, legal experts feel that this is not a completely good picture due to the many complexities in such cases.
Pooja Mahajan, managing partner, Chandiok & Mahajan Advocates, a law firm, says that it is very difficult to include a realty firm in liquidation, therefore, such cases either drag on for a long time or see acceptance of resolution plans.
“However, even after approval, management of multiple litigations, especially by homebuyers, clarity on land parcels and licenses required to complete incomplete projects are some of the challenges faced by the new owners of such companies,” Mahajan said.
As demand for residential and commercial properties continues to rise, many strategic buyers and investors are actively scouting for real estate companies with large land parcels currently under bankruptcy administration for loan defaults, especially in the cities.
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