NEW DELHI: The proposed changes in the resolution process of real estate firms come with its own challenges, according to experts tracking the development.While it safeguards solvent projects by avoiding Corporate Insolvency Resolution Process (CIRP) against the entire company, it may become a difficult task to track where the money lent from banks is spent.
Sanjeev Ahuja, an insolvency professional and founder of Insolvency Clinic, says a real estate project, unless it is a special purpose vehicle, is part of a corporate entity. “So, if you initiate CIRP against a project, how you identify which money got spent where, whether a particular Committee of Creditors member lent for half of the projects or some of the flats, whether some money got used in a completed project and some in an unfinished project. There will be much confusion. it’s easier said than done,” he said, adding that they would have to wait for the IBBI to come up with a proper standard operating procedure (SoP )or frequently asked questions (FAQ) to understand how they are going to do it.
Prashant Thakur, Sr. director & head – research, ANAROCK Group, says by allowing proceedings only against specific projects that have defaulted, rather than the entire company, it could help minimise disruption to the company’s ongoing operations and preserve value for stakeholders. “It may reduce the burden on courts and other authorities responsible for overseeing the resolution process. It may also help to increase the chances of successful resolution,” added Thakur.