Share of real estate recoveries under IBC rises to 18.8%, says report

Of the total number of CIRP cases, real estate cases have averaged about 18-20 in each quarter between October 2021 and December 2022. However, this jumped sharply in March 2023 to 44 corporate debtors being admitted into CIRP.

The report adds that the total admitted claims from the real estate sector between Oct 2022 to June 2023 stands at Rs 377 billion. With a view to further streamline the CIR process, the Ministry of Corporate Affairs (MCA) has invited comments on changes being considered to the IBC. The report covers the several key changes that are being considered. Significantly, these also include the increased use of technology in the IBC eco-system to make it more efficient and effective.

Sudip Mullick, partner in the Real Estate and Construction Practice Group, Khaitan & Co, says, “While CIRPs of real estate companies have increased in the last few quarters, it would be interesting to see how effectively these cases are resolved. Positive outcomes in the ongoing CIRPs of real estate companies would be the key to drive confidence of homebuyers and give a boost to the sector."

One of the key reasons for prolonged delay in resolution of insolvencies has been the large number of vacancies in the National Company Law Tribunals (NCLT). With a view to strengthen the bench, the government has recently appointed 21 members, which will take the bench strength closer to the sanctioned number of 63. This is expected to reduce the delays faced in the resolution of insolvent companies. However, it will be critical for the government to continue this momentum and ensure that vacancies are filled on time, the report says.

Aashiesh Agarwaal, SVP — Research & Investment Advisory, Anarock Capital, says, “A Committee constituted by the Ministry of Housing and Urban Affairs (MoHUA) recommended the project-wise CIRP of real estate companies as opposed to company-wise CIRP. Further, it was recommended that necessary amendments be made to the enabling RPs to transfer the ownership and possession of sale units to the allottees while the CIR process is underway. Finally, the report recommended creation of five additional fast-track benches at the NCLT, to expedite the cases including real estate cases.”

The report details the proposed amendments by MCA and the recommendations by MoHUA, and also examines updates on several real estate companies undergoing CIRP or having completed CIRP. These include Jaypee Infratech, Unitech, Supertech, Lavasa Corporation, Amrapali, D S Kulkarni, Three C Homes, Radius Estates, and others.