Good News For Homebuyers: Insolvency Board To Allow Developers To Hand Over Possession Of Flats Before Resolution

The Insolvency and Bankruptcy Board of India (IBBI) said in a release that it has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations).

The amendments can potentially provide relief to homebuyers who have not received possession of their plots or flats. Often homebuyers do not receive possession of plots, or apartments if the real estate developer is part of an insolvency resolution process. After the amendment developers will be able to hand over the possession to homebuyers even if the resolution process is still ongoing. However, to conduct such a handover the resolution professionals will need to obtain approval from a committee of creditors.

“The Resolution Professional, after obtaining approval of the committee of creditors and upon fulfilment of all obligations by the homebuyer, can now hand over possession of plots, apartments, or buildings to the homebuyers while the resolution process is still ongoing. Thus, the distressed home buyers would not have to wait for long periods in order to get possession of their properties,” IBBI said.

The IBBI also introduced several other amendments which can potentially offer relief to homebuyers who are struggling to gain possession of their property such as the appointment of facilitators to ensure that homebuyers have greater participation in the insolvency resolution process. The Insolvency Board added that facilitators will work as intermediaries between authorised representatives and the creditors.

“Facilitators can now be appointed for sub-classes within large creditor classes such as homebuyers to ensure their effective participation in the insolvency resolution process. The roles and responsibilities of the facilitators include facilitating communication between the authorised representative and the creditors assigned to him and providing information and clarifications to the creditors about the insolvency resolution process,” the release stated.

Other key amendments include a provision which allows the Committee of Creditors (CoC to invite land authorities to their meetings. The IBBI aims to increase the viability and feasibility of resolution plans by involving land authorities such as NOIDA and HUDA in the resolution process.

Additionally, in a bid to increase transparency, the IBBI has also urged resolution professionals to prepare a detailed report on the status of development rights, approvals, and permissions for real estate projects within 60 days of insolvency commencement.