Reverse insolvency for realty yet to take shape

Bifurcation of assets, service provisions to projects remain hurdles

- Pavan Burugula

A government move to protect homebuyers in bankrupt real estate projects is yet to take concrete shape given the way developers structure their projects, two people aware of the matter said.

The so-called reverse bankruptcy framework was first proposed by the ministry of company affairs in a discussion paper in January. It would apply the insolvency law to the stalled project and not the entire company. Creditors can ask the promoter to bring in funds and finish the project, or assign the project to another developer to complete. This contrasts with the normal Insolvency and Bankruptcy Code (IBC) procedure where any default triggers insolvency against the whole company.