To achieve higher resolutions in the real estate bankruptcy cases, the Insolvency Board of India (IBBI) has asked resolution professionals (RPs) to operate separate bank accounts for each of the real estate project. This move is likely to speed up the resolution process in a sector which accounts for over one-fifth (21 percent) of the total CIRPs (corporate insolvency resolution processes) initiated till date.
Realty sector has a weak track record when it comes to bankruptcy resolutions. For instance, the proportion of real estate companies going for liquidation (18 percent) has been more than the resolved cases (15 percent).
Experts said that latest amendments will bring the real estate sector in sync with the IBC rules. “The requirement of a separate bank account for each project would help in facilitation of project-wise resolution. The RPs are empowered to invite resolution plan for each project as resolution of individual projects would pave the way for better price discovery, competitive bidding and early resolution in comparison to group project resolution,” said Anjali Jain, partner (insolvency & restructuring practice) at law firm Areness.
While making a bunch of changes to the insolvency regulations, the IBBI has asked RPs to provide fair value, the liquidation value and valuation reports to every member of the committee of creditors (COC). Moreover, the COC members are required to maintain confidentiality on these subjects, and should not use the information contained in the valuation reports to cause an undue gain or undue loss to itself or any other person.
“The rules aim at keeping the valuation figures undisclosed as the resolution value of real estate sector is primarily dependent on the market sentiments. The creditors are given impetus to navigate such market sentiments for better recoveries and resolution,” said Jain.
The latest amendments also talks about COC to consider forming a monitoring committee for the implementation of the resolution plan. “Where the committee considers that a monitoring committee is required, it may decide to constitute the same with the resolution professional or propose another insolvency professional or any other person as its members,” the IBBI said.