Across the country, home buyers and financial institutions have been pinning their hopes on the dedicated bankruptcy court for resolution and a much-needed push to ensure delivery of over 100,000 such houses, most of which have been stuck for over a decade.
However, despite the Supreme Court appointing new boards or designated authorities to complete construction of pending projects, they are yet to see much progress due to disagreements amongst various stakeholders, such as government authorities and secured lenders.
Appointment of resolution professionals and moratorium need to start from reference of application by financial creditors, experts said.
“Once the committee of creditors approves a plan, then NCLT may focus on compliance of IBC and rely on commercial wisdom of CoC,” said Rajiv Chandak, Partner, Deloitte India. “Delay in implementation of admission and resolution is leading to deterioration of assets in the company. Time taken in CIRP can be shortened dramatically and bring our code further in line with developed jurisdictions.”
Among the bigger cases, such as Unitech’s, there has been little progress in completion of projects as the scheme formulated by the new board is facing objections from authorities and secured lenders on grounds of unfair and arbitrary treatment to them under the plan.
In the Jaypee Infratech case, the corporate insolvency resolution process (CIRP) has been on for four years and the resolution plan approved by committee of creditors (CoC) under insolvency & bankruptcy code (IBC) is pending for National Company Law Tribunal (NCLT) approval.
The delay in implementation of the plan also deters bidders who are interested in working on resolution.
“Average resolution timelines in NCLT have gone to nearly 600 days from the mandatory outer limit of 270 days. This changes the assumptions, costs, value of assets and liabilities and regulatory regime for projects, which makes resolution applicants wary of taking it forward. The limit of 270 days for closure of CIRP process should be sacrosanct for realty projects,” said Amit Goenka, CEO, Nisus Finance.
According to him, time-bound clearances, including RERA, planning and approval authority need to be ensured to allow immediate commencement of the projects post resolution. The projects can be offered discounts in premiums, development charges, FSI costs and approvals, with an option to offer state government stake in lieu of such discounts.
Two years ago, the Supreme Court removed the management led by the erstwhile promoters Chandras in Unitech and appointed an independent board of directors. However, in the last two years, the board could not carry out any activity with respect to completion of houses pending approval of the scheme before the top court.
This has left home buyers helpless and not knowing where to go now.
“In the last 18 months, post the appointment of a new Unitech board, our Alder Grove project, which was 6 months away from delivery, has seen no construction activity. The agony of 108 months’ delay has become 126 months now. Home buyers and taxpayers are made to suffer with no relief on interest cost,” said Aditya Mishra, a finance professional who is awaiting delivery of a house he bought in a Unitech project. “What justice is being served by making home buyers bear the entire economic cost of this delay without any definite timelines for delivery of houses.”
In cases like Amrapali, where raising funds for project completion has turned out to be a challenge for NBCC, part resolution and part liquidation can help.
“Not only in real estate but across sectors, companies have viable and unviable businesses. Resolution can be provided for viable business and liquidating the unviable ones and redeploying the assets can be allowed. If you can sell the business in parts as part of CIRP that should also help in getting liquidity to support completion of projects” Deloitte India’s Chandak said.
Home buyers had bought the houses in these incomplete projects 8-10 years ago and there is still no visibility of getting possession of their homes.
In the case of Unitech, it is understood that the majority of projects have significant surplus cash to cater to the needs of not only home buyers in those projects but also all its stakeholders. And the problem of the few projects that are facing a shortfall can be resolved through sale of unencumbered assets of the company without disturbing the rights of various stakeholders.
Experts said that the resolution in these cases can only take place when the concerns of each project are addressed separately, including identifying interested developers and investors who can take responsibility and also bring requisite expertise and funds to complete the project in committed timelines and balance interest of creditors of each project.
This way, if the viable projects are auctioned to interested developers against upfront consideration, it will not only resolve viable projects but also generate funds for companies to resolve few unviable projects. Ends