Special bankruptcy lane for realty soon

IBBI plans to ring-fence stressed realty projects from others

- Gireesh Chandra Prasad

Homebuyers may no longer get trapped when a builder smoothly executing their project lands up in bankruptcy court due to defaults in his other projects.

India's bankruptcy regulator is looking to ring-fence the performing projects from the failures, in a rare step for the sector that generates a large chunk of bankruptcy cases in the country.

The Insolvency and Bankruptcy Board of India (IBBI) has formed an internal committee, and is examining a framework to enable insolvency resolution at the level of individual projects, two people aware of the matter said. Under the existing model, bankruptcy resolution happens at the company level covering all projects, stressed or otherwise.

This would be a special arrangement only for the real estate sector which has widespread public interest implications, the people cited above said on the condition of anonymity. The sector accounts for more than a third of around 8,500 insolvency cases admitted to tribunals so far under the bankruptcy code.