62% of instances involving real estate insolvency have a successful conclusion.

Despite multiple difficulties, including numerous unhappy homebuyers, the insolvency and bankruptcy proceedings of real estate enterprises have seen consistent progress in terms of remedies.

Experts predicted that the performance would increase if the government changed the code to allow for resolution based on the type of projects being undertaken rather than imposing a single, strict framework across the board.

According to the most recent data from the Insolvency & Bankruptcy Board of India (IBBI), a total of 6,571 businesses from various industries were placed under administration up to the end of March this year.

Out of these instances, over 21%, or 1,380 businesses, were in the real estate industry. Of these, 854, or nearly 62%, had a successful resolution plan after the Insolvency & Bankruptcy Code (IBC) was introduced in 2016.

“Since homebuyers are involved as operational creditors in real estate projects and developer insolvency settlements, these difficulties and obstacles are distinct from those in any other industry.

After taking into account such particular elements, it is necessary to assess the numbers achieved thus far. The issues would be resolved more quickly with the use of a bespoke code, according to former CREDAI president Jaxay Shah.

The rehabilitation plan for New Delhi builder Dignity Buildcon was accepted by the National Company Law Tribunal (NCLT)’s New Delhi court on May 17. Experion Developers is situated in Gurugram.

Similarly to that, on April 24, the NCLT also approved the Sare Gurugram revitalization plan. Lenders authorized the partnership of KGK Realty and Dhoot Infrastructure Projects’ plan and the tribunal after the company admitted liabilities totaling more than 2,112 crores.

These are not occasional instances; rather, there is a growing trend among investors and purchasers to acquire bankrupt real estate companies through the insolvency resolution process in order to turn them around and make a profit in the process.

The most anxious real estate developers involved in the insolvency resolution process are from major cities where obtaining good property parcels is exceedingly challenging. Due to this, bidders are more interested in purchasing failing real estate firms at a loss.

According to NPS Chawla, co-founder of the law firm Aekom Legal in New Delhi, “There are numerous instances where the real estate companies are facing insolvency due to project delays, delays in receiving approvals, cost overruns, or lack of funds, but many investors are willing to invest in such projects, keeping the future upside in mind.”

He claims that the allottees themselves have banded together and are finishing the projects under the pool and constructing mechanisms in numerous projects where firms have declared bankruptcy.

It’s interesting to note that 164 out of the 678 enterprises that were saved once the restoration plans were approved belonged to the real estate and construction sector. Legal experts believe that there are various complexities in these cases. Therefore, it is not entirely bright.

It is exceedingly difficult to enter a real estate firm into liquidation, according to Pooja Mahajan, managing partner of the law firm Chandiok & Mahajan Advocates. As a result, such cases either drag on for a long period or see the acceptance of resolution plans.

“However, following approval, managing multiple litigations, particularly by homebuyers, clarity on land parcels, and required licenses to complete incomplete tasks are some of the challenges that new owners of such companies face,” Mahajan noted.

Strategic buyers and investors are aggressively looking for real estate companies with sizable land parcels presently under bankruptcy administration for loan defaults, especially in cities, as the demand for residential and commercial properties increases.