IBC in real estate: Poor resolution rates but superior value maximization

6 Dec 2022 , 03:54 PM

Key takeaways from the report are highlighted below.

• While real estate comprises just 5% of all cases under IBC, its resolution rate is among the lowest.
• IBC has driven superior value realization by financial creditors in real estate — with this class of creditors realizing 66% of the admitted claims as compared to just 31% of admitted claims realized in other sectors.
• IBC has been very effective in helping lenders secure their dues in a much quicker timespan than witnessed earlier.
• Successfully resolving insolvencies and driving value realization through this code requires adequate planning and a structured approach.
• One of the most important milestones in the evolution of IBC was an amendment which recognizes homebuyers as financial creditors. This means that homebuyers are now effectively considered at par with banks and other institutional creditors when it comes to recovering dues from real estate developers who have gone bankrupt.
• At 54%, real estate has the highest proportion of ongoing cases under Corporate Insolvency Resolution Process (CIRP), followed by other industries like construction, electricity, and transportation.
• This report examines the progress made on marquee cases involving real estate, including Ariisto Developers, Unitech Ltd., Supertech, Radius Estates, Jaypee Infratech, Amrapali Group, Lavasa Corp, and DS Kulkarni.
• Due to the involvement of various homebuyers in the real estate project and a high level of public interest, the courts have adopted a purposive stance to surmount the unique legal issues that emanate from the insolvency resolution of the real estate sector.