In what may come as a great relief to the home buyers, the government is considering allowing registration of flats in completed projects even if the developer of the project is undergoing insolvency resolution, The Economic Times (ET) reported.
Given the complexity of the bankruptcy resolution in the housing sector, if this proposal received approval, the National Company Law Tribunal (NCLT) is likely to reach out to the relevant Real Estate Regulatory Authority (Rera) to seek their input and understand their concerns, the report said.
If this move sees daylight, it is expected to relieve thousands of homebuyers living with the scary thought of all their money going down the drain if in case their developer goes bankrupt.
Some estimates say that more than 100 residential projects in Noida and Greater Noida areas of the National Capital Region alone are either on a pause or have crossed their delivery timelines, the ET report said.
Experts who track the developments in the housing market said that while the current Insolvency and Bankruptcy Code (IBC) rules do not prevent the handing over of flats to buyers during the resolution process, an explicit IBC provision that clearly talks about the flat transfer and registration would make things easier and induce confidence in the buyers, the report added.
Partner and head for M&A at a consultancy firm, Corporate Professionals Capital, Manoj Kumar was quoted in the report as saying, “Where full payment is already received, there should be no reason to stop registering the flats in favour of homeowners merely because the company is in the CIRP (Corporate Insolvency Resolution Process).”
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Highlighting the challenges in resolving bankruptcy cases in the housing sector, a study by Grant Thornton Bharat said that real estate comprises almost 23 per cent of total insolvency cases filed but accounts for only 13 per cent of the resolved cases, the ET report said.
In other words, real estate bankruptcy cases have a higher chance of remaining unresolved.