The enactment of the Insolvency and Bankruptcy Code 2016 (IBC), along with Real Estate (Regulation and Development) Act, 2016 (RERA Act) begins a new era of regulation for the Indian Real Estate Sector. Both these reforms strengthened the hand of homebuyers, giving them alternate forums to get justice. Homebuyers can now file claims by invoking Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal (NCLT) and before consumer courts under RERA. In short, homebuyers now have the same powers as banks and financial creditors have. Prior to this amendment, homebuyers' recovery status was hazy at best. Only banks and other lending/ financial institutions had any real claim or right of recovery in a real estate developer’s asset when liquidated as part of the bankruptcy process.
After the enactment of the Insolvency and Bankruptcy Code, 2016, there has been a steady increase in the number of corporate insolvency resolution process (CIRP) real estate accounts for nearly 20 per cent share or approximately 793 cases as of September 2020 out of the total 4,008 cases filed since inception. Subsequently, over 50 per cases have already been closed till July-September 2020, while 395 remain for which banks and operational creditors are seeking resolution.
Out of the total admitted 209 CIRPs in real estate, just 33 per cent were closed, as on Jul-September, 2018. "Thus, the bankruptcy reform has sought to rebalance the rights of lenders and shareholders of defaulting firms so that the fear of loss of ownership and management control would force the promoters in deciding a rescue package. The buyers and creditors today may have avenues of seeking legal intervention and relief to secure their debts and investments liberally from these bodies, the solutions need to be expedited and implemented.
Since the inception of the provisions for CIRPs on December 1, 2016, a total of 4,008 CIRPs across various sectors had commenced by September 2020. Of these, 473 have been closed on appeal or review or settled, 291 have been withdrawn, 1,025 have ended in orders for liquidation and 277 have ended in approval of resolution plans. Currently, 1,942 CIRPs remain, for which banks and operational creditors are seeking resolution.
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