IBC hits the realty sector- will it alter changes in this sector too?



RERA and GST have been the key players in recent years since the Modi Government took charge of this country. The prime motive was to regulate the market and ease the business sector. You may say action speaks louder than words. Housing for All, GST and RERA – all are proof the government is showing resolve and intent. And they all put the consumer before anything else.

The IBC ordinance is the latest entry into the ring. What does it hold for homebuyers like you and me? A lot.

Advantages of new legislation- IBC

  1. One, it seeks to protect homebuyers’ interest. They will now be on par with financial creditors when it comes to claims should a realtor go bankrupt. The advance given by them to the builder will be deemed as credit. In the case of insolvency, they are entitled to get back their homes or a refund.In this context, the delayed projects of Jaypee Infratech , Supertech and Amrapali and the hardships of homebuyers are all well known.
  2. Two, the ordinance seeks to lower the voting cut-off for approval of resolution plans to 66 percent majority. That’s a big drop from the 75 percent previously. The lower limit is to give the resolution plan a shot rather than outright liquidation.Plus, the insolvency application will be allowed to be withdrawn only if 90 percent of creditors agree. That means a higher bar is set for withdrawal of the insolvency application.
  3. The latest ordinance takes the game a notch above as it seeks to remove grey areas and streamline eligibility rules. The Section 29A in the IBC, introduced by the first ordinance that put paid to hopes of promoters seeking a back-door entry, has been made tighter to make it leak-proof.People who enter into backdoor arrangements with corporate debtors are sought to be clubbed under the definition of connected people. That’s another leak the new IBC ordinance is trying to plug. After all, the government is keen to give the maligned real estate sector the credibility it so desperately needs.


The new legislations have boosted the economy by attracting more investments over the past few years and with the enactment of Insolvency laws and the Adjudicating Authority acting stringently towards defaulters is a positive step towards making the market free of stressed assets. The motive and purpose of RERA was also similar but seems out of the two legislations IBC has taken a lead in a very short span of time.

With FDI inflows staging a comeback, the missing pieces in the real estate story are falling into place. But RERA is still a job half done. It has been one year since the Real Estate (Regulation and Development) Act, 2016, kicked in. The sad part is its compliance across the country is in a sorry state and is nowhere close to its full implementation in letter and spirit.

Disclaimer – The above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.

Leave a Reply

Your email address will not be published. Required fields are marked *