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Solution To Real Estate Insolvencies Soon

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Solution To Real Estate Insolvencies Soon

  • 18 May 2023

The ministry of corporate affairs is attempting to come up with some "speed breakers" to guarantee there are checks and balances in the law because it is worried about the potential abuse of its plan to enable project-based insolvency resolution for real estate businesses, according to government sources.

When a request is made to begin the corporate insolvency resolution process (CIRP) on behalf of a corporate debtor who is the promoter of a real estate project and the default relates to one or more of its real estate projects, the adjudicating authority, at its discretion, shall admit the case but apply the CIRP provisions only with respect to such real estate projects, according to a proposal made by the ministry in its consultation paper on changes to the Insolvency and Bankruptcy Code.

The government is debating whether a completely different mechanism is necessary to deal with real estate insolvencies, even though the National Company Law Tribunal (NCLT) may be given the authority to decide cases where the insolvency of a real estate project must remain limited to the project in default.

"There is no one solution for insolvent real estate projects. A top government official stated, "We must develop a strong system with appropriate limits in place.

The ministry has spoken with the Real Estate Regulatory Authority (RERA) personnel on this topic, together with the housing and urban affairs ministry.

One suggestion is to restrict project-wise insolvency to those who have registered with RERA.

According to the firm's most current study on the Insolvency and Bankruptcy Code, absenteeism, activism, and individual voting preferences of homebuyers frequently cause important decisions to be postponed or changed by present and voting creditors.

The proposed amendments to the Insolvency and Bankruptcy Code would also provide the resolution professional, with the CoC's approval, to transfer title and possession of a plot, a flat, or a building to the allottees.

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