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In a relief for home buyers, insolvency regulator IBBI has clarified that the 0.25 per cent regulatory fee imposed by it on CIRPs would not be payable where the approved resolution plan in respect of a real estate project is from an association or group of allottees in such real estate project.
The move to exempt home buyers from the ambit of 0.25 per cent regulatory fee would particularly help small home buyers who had put together resolution plans to rescue the stressed real estate projects.
It may be recalled that Insolvency and Bankruptcy Board of India (IBBI) had in September last year imposed a regulatory fee of 0.25 per cent on corporate insolvency resolution plans (CIRP) as part of its overall efforts to shore up its finances and reduce dependence on the Centre’s grants-in-aid.
The regulatory body has also imposed a 1 per cent regulatory fee on third-party service providers and professionals appointed by IPs.
The regulatory fee of 0.25 per cent — which had come into effect from October 1 — is now being applied on the realisable value to creditors under the resolution plan, and only in those cases where the amount of the resolution plan exceeds the liquidation value.
Hari Hara Mishra, CEO, Association of ARCs in India, said that the present relaxation is a positive move for small home buyers. However, many more structural changes to address information asymmetry, improvements in process efficiency enhancing chances of resolution, and better realisation amount with strict adherence to timeline are in the pipeline and awaited, he said. “IBBI has recently proactively been in touch with several ARCs soliciting their feedback on these aspects”, Mishra added.
Anoop Rawat, Partner - Insolvency & Bankruptcy, Shardul Amarchand Mangaldas & Co, said this latest IBBI amendment is intended to support resolution plans from the allottees by reducing the cost burden on such resolution. This will further reduce the cost of completion of the stressed projects, Rawat added.
Mukesh Chand, Senior Counsel, Economic Laws Practice, said that in real estate projects where the home buyers are involved, the resolution plan is primarily aimed at the completion of projects.
“In such situations, since the creditors are mainly home buyers and resolution results in completion and delivery of flats, there is no logic in IBBI collecting fee.
Accordingly, an explanation has been added for removal of doubts, in respect of insolvency resolution of a real estate project”, Chand added.
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