Source: Mint
Context:
The Insolvency and Bankruptcy Board of India (IBBI) is considering a framework to allow project-specific insolvency resolution in the real estate sector. The move aims to protect homebuyers in performing projects from being affected by defaults in a developer’s other stressed projects.
Current Scenario:
- Insolvency resolution is company-level, covering all projects under a developer, stressed or not.
- This can impact homebuyers of non-distressed projects, delaying possession and causing financial uncertainty.
- Real estate accounts for over a third of the 8,500 insolvency cases admitted under the Bankruptcy Code.
Proposed Framework:
- Enable insolvency resolution at the level of individual projects, instead of the entire company.
- Developers would maintain separate books of accounts for each project, allowing precise allocation of liabilities and restructuring efforts.
- The approach ensures that viable projects continue smoothly, safeguarding homebuyers’ interests.
