Empowering Home Buyers: IBBI’s game changing amendments in IBC regulation

2023-09-20 16:27:25

Home buyers as a class of financial creditors may now get an effective say in IBC with the insolvency regulator, IBBI, enhancing the role and responsibilities of their Authorised Representative (AR) in the resolution process.

Thanks to the latest corporate insolvency regulation changes, the AR will now have to act as a bridge between the Committee of Creditors (CoCs) and the home buyers in addressing the latter’s information gaps and updating them with procedural clarity.

Till date, one of the biggest challenges for home buyers — although they had been categorised as financial creditor for IBC purposes — has been the lack of complete information on the functioning of the CoC, in which they are represented through AR.

Now AR has been mandated legally to assist the Home Buyers in understanding the discussions and considerations of the CoC.

Also AR is required to review the contents of the minutes prepared by the resolution professional (RP) and provide his comments to the RP, if any. Now, the AR has also been tasked to help the home buyers prepare a marketing strategy for the assets of the company going through the corporate insolvency resolution process (CIRP).

The AR will have to assist home buyers in evaluating the Resolution Plan submitted by the Resolution Applicants (prospective investors). The Insolvency and Bankruptcy Board of India (IBBI) has also tasked the AR to regularly update the home buyers on the progress of the CIRP. The AR has been empowered to represent Home Buyers before NCLT, NCLAT and other regulatory authorities.

Hari Hara Mishra, CEO, ARC Association, said that the latest amendment attempts to enhance the role play of home buyers through the authorised representative and mandates it as an integral part of decision making including in marketing strategy and initiatives.

Another important feature of the latest regulatory change is making the CoC minutes, in which resolution plan is approved, to be made available to NCLT (Adjudicating Authority), which will lead to faster and more transparent resolution process, he added.

Mukesh Chand, Senior Counsel, Economic Laws Practice, said, “Even within the IBC process, home buyers face mounting challenges due to a lack of information and procedural clarity. There is a pressing need for greater awareness in this regard.

While the IBBI has taken steps to address this issue by delineating the roles and responsibilities of home buyer representatives, more efforts should be directed toward prioritising real estate matters involving home buyers”. This could could expedite project resolutions, providing relief to home buyers trapped in the cycle of delays, uncertainties and continued repayment of home loan installments during this period, he added.

The real estate industry in India accounts for 7.3 per cent of India Gross Domestic Product (GDP), which is estimated at about $3.5 trillion.

Up until June 2023, real estate along with manufacturing and construction accounted for 71 per cent of the CIRPs that were admitted. Real estate sector contributes 21 per cent of all IBC cases, second only to manufacturing.