The Insolvency and Bankruptcy Board of India (IBBI) has proposed a series of reforms aimed at simplifying the insolvency process for real estate companies, intending to enhance regulatory clarity, transparency, and stakeholder protection. Issued as a discussion paper on Thursday, the proposals focus on introducing land authorities into the Committee of Creditors (CoC) as non-voting invitees, thus formalising their involvement in crucial decision-making processes for real estate insolvencies under the Insolvency and Bankruptcy Code (IBC).
The IBBI’s recommendation to include land authorities within CoC meetings reflects their essential role in real estate projects, where their presence could help streamline regulatory compliance and improve the quality of resolution plans. Currently, representation in the CoC is restricted to financial creditors, leaving a critical gap for land authorities whose involvement could directly impact the outcome of these resolution proceedings. This enhanced inclusion is expected to bridge regulatory and financial oversight, thereby increasing the efficiency and feasibility of solutions put forth during insolvency processes.
The discussion paper also proposes addressing issues around land allotment cancellations in cases where real estate companies face insolvency. IBBI recommends that resolution professionals report such cancellations to the CoC, enabling creditors and other stakeholders to make informed choices about whether to pursue liquidation or continue resolution efforts. Additionally, in cases with a large number of creditors, the IBBI suggests allowing multiple facilitators to improve communication, thereby strengthening representation and ensuring a fair resolution process.
To further enhance transparency, the IBBI is pushing for secure online access to CoC meeting minutes for all creditors involved in real estate insolvency cases. This measure aims to mitigate misinformation and speculation, facilitating informed decisions for creditors across the board. Moreover, IBBI has recommended simplifying the possession handover process, allowing resolution professionals to transfer ownership to homebuyers who have met their financial obligations, contingent upon CoC approval, a move that may accelerate homebuyers’ access to their investments.
IBBI has opened the floor for feedback from stakeholders on these proposals, with a deadline of November 27. Following this, the board will review feedback to make necessary amendments, aiming to shape the future of real estate insolvency with reforms that promise greater transparency, sustainable decision-making, and regulatory cooperation.
