The Insolvency and Bankruptcy Board of India has issued a new amendment exempting assets in a real estate project that have been handed over to allottees from the liquidation process. This move provides relief to homebuyers who had been given possession of their homes but were left in uncertainty after the builder’s company was declared insolvent.
The latest notification, dated February 12, states, "For the purposes of clause (e) of sub-section (4) of section 36, wherever the corporate debtor has given possession to an allottee in a real estate project, such asset shall not form a part of the liquidation estate of the corporate debtor."
Prior to this amendment, homebuyers who had received possession of their properties were bundled with buyers who had not, in the event of the builder becoming insolvent, leaving them with no remedy except for being entitled to a refund.
The amendment aims to provide certainty to buyers who have already received possession of their units, ensuring that completed projects will not be part of the liquidation process. It also allows the committee of creditors (CoC) to request separate resolution plans for each project.
To ensure financial transparency and accountability, the amendment also mandates having a separate bank account for each real estate project under a corporate debtor.
Real estate accounts for the second-highest number of insolvency resolution cases in India, with manufacturing having the highest share at 40 percent, followed by real estate at 21 percent, construction at 11 percent, and trading at 10 percent.
These changes are significant as they address the concerns of homebuyers who have been stuck in legal battles after builders went bankrupt, providing them with more certainty and protection in such situations.
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