IBBI is considering a proposal to allow RERA representatives to join CoC meetings in real estate insolvency cases, though without voting rights.
An official said that bringing in RERA at an early stage of the resolution process can help identify approval hurdles, compliance issues and feasibility concerns upfront. Besides, the authority’s role in resolution could help ensure that the project moves forward without fresh regulatory roadblocks.
“The presence of RERA officials in the meetings conducted by the CoC closes a practical gap in real estate insolvency. The idea is that resolution cannot succeed on paper alone, it has to work at the regulatory and project-implementation level as well,” the official noted.
At the moment, RERA only enters the scene indirectly and late in the Corporate Insolvency Resolution Process (CIRP), often after a resolution plan has already been passed by the lenders. This leaves the bidders unaware of the legacy compliance issues, pending approvals, and past promoter violations.
The move comes after the Supreme Court’s February verdict in the Supertech case holding that in cases of real estate insolvency, the claims of all creditors, including the banks, would be considered only after the promised homes are delivered by the developer to the homebuyers. This makes RERA’s direct involvement in the CIRP even more important.
Till recently, the IBBI was considering the inclusion of RERA in project monitoring committees which are formed after a resolution plan has been approved. However, some stakeholders are of the view that early involvement of RERA could help identify regulatory concerns before the CoC votes for a plan, allow potential bidders to factor in compliance costs before submitting their bids, and give confidence to stuck homebuyers for being “duly” represented.
The official said that incoming developers/bidders often face challenges pertaining to RERA’s domain after their plans have been approved. “When a new developer buys a stalled project via IBC, he has to face a lot of issues like how to treat past RERA dues, how to get fresh approvals requiring RERA authorisation, or how to deal with the violation of norms by the erstwhile promoters. Many of these problems can be resolved if RERA comes into the picture early on,” the official said.
Under the proposal, RERA would still not get voting powers in the CoC. Instead, its role would remain advisory and observational to ensure that CoC remains the decision-making body while benefiting from RERA’s inputs during the plan evaluation.
The latest quarterly report by IBBI shows that real estate is one of the most represented sectors under IBC, accounting for 22% of all 8,987 admitted CIRPs, which is the second-highest after manufacturing.
Experts said that the proposal aligns with the broader IBBI reform direction of bringing competent authorities into real estate CIRPs. “The objective of the proposal is to give resolution applicants and homebuyers greater certainty, reduce avoidable delays, and improve the chances of actual project completion,” said Manish Gupta, lead (corporate legal and secretarial) at AKM Global.
“A resolution plan may be commercially attractive, but unless regulatory feasibility, project approvals and statutory compliance are addressed upfront, implementation can get delayed after approval,” said an insolvency professional.
Some experts stressed the need for regulatory certainty after a resolution plan is approved, arguing that incoming promoter should not remain exposed to legacy compliance disputes. “The critical piece will be regulatory certainty post-resolution, so that new applicants are bound by future compliance while past defaults are dealt with strictly under the approved plan,” said Srinivasa Rao, senior partner & leader (risk advisory) at Nangia Global.