A report by ICRA emphasized the need for India’s real estate insolvency framework to move towards a project-centric model focusing on completing and delivering homes. This shift, the report suggested, requires better coordination between the Insolvency and Bankruptcy Code, 2016, and the Real Estate (Regulation and Development) Act, 2016. The Committee on Framing Guidelines for Insolvency Proceedings in the Real Estate Sector recently submitted its recommendations to the Insolvency and Bankruptcy Board of India.
The report highlighted the importance of transitioning from an entity-centric, recovery-oriented system to a project-centric, completion-driven approach. Manushree Saggar, Senior Vice President and Group Head, Structured Finance at ICRA Ltd., stressed the significance of prioritizing project completion over financial recovery in the real estate sector. She pointed out that real estate insolvency poses unique challenges with high social costs and direct impacts on numerous homebuyers.
With 55 key issues identified in real estate insolvency, the report put forward 155 recommendations addressing structural, procedural, and institutional aspects of the framework. These suggestions aim to enhance efficiency, ensure timely project completion, boost stakeholder confidence, and align insolvency processes with sectoral regulations. The goal is to integrate insolvency law with real estate regulations, judicial guidance, and constitutional values to facilitate effective resolution and reduce uncertainties.
According to ICRA, aligning insolvency procedures with real estate sector-specific regulations could enhance efficiency, promote timely project completion, and increase stakeholder trust. The report highlighted that ongoing and resolved insolvency cases impact a significant number of homebuyers, leading to housing insecurity for nearly a million individuals when considering household sizes.
