New real estate insolvency guidelines require distressed companies with multiple projects to maintain separate bank accounts and disclose project-level financial and construction details during the resolution process, according to a report by Dinamalar.
The guidelines have been issued in the context of companies becoming insolvent because of financial mismanagement, leaving several real estate projects affected. The measures are intended to ensure that each project is examined separately when a company undergoes insolvency resolution or when its projects are considered for takeover by another company.
Under the new requirements, a company that owes money and operates more than one real estate project must open a separate bank account for each project. This would create a project-wise record of funds during the insolvency-resolution process instead of treating the company’s entire real estate portfolio as a single financial unit.
The committee constituted for the restructuring process must also be given adequate time to examine the financial position of every real estate project independently, the report said. The separate review is expected to cover the financial condition and status of each project before decisions are taken on resolution or acquisition.
The guidelines also require the resolution process to examine whether the company’s real estate projects are registered with the real estate regulatory authority. The project-level information to be listed includes the real estate authority’s registration details, the work completed so far, the number of homes handed over to buyers and the status of homes that remain pending.
These records are intended to give the resolution committee a consolidated view of the company’s real estate obligations. They would also distinguish between projects that may have different levels of construction progress, financial exposure, regulatory compliance and delivery status.
The measures address a recurring administrative difficulty in insolvent real estate companies, where several projects may be at different stages while sharing the same corporate ownership and financial systems. Without project-level information, the resolution process may not clearly establish which assets, liabilities, construction commitments and buyer obligations belong to each development.
The guidelines place the responsibility on the resolution process to collect and examine the relevant real estate information before taking action. This includes verifying regulatory registration, recording construction progress and identifying the homes that have already been handed over and those that remain incomplete.
For homebuyers, the disclosures provide a formal basis for identifying the status of an affected project during insolvency proceedings. For lenders and potential acquiring companies, the project-wise accounts and records are intended to support a more detailed assessment of the development’s financial and operational position.
Dinamalar reported that the Insolvency and Bankruptcy Board issued the new procedures and that the Central Government had directed that complete details of the real estate projects being developed by an insolvent company be disclosed. The report did not provide a separate implementation date or details of any specific company or project covered by the guidelines.
