NAREDCO-UP writes to Finance Ministry for Suspension of IBC

The National Real Estate Development Council (NAREDCO) has requested the Ministry of Finance and Corporate Affairs for suspension of IBC provisions for one year to protect the corporate entities considering the unprecedented second wave of COVID19. The UP chapter of a

BY Realty Plus
Published - Friday, 28 May, 2021

NAREDCO-UP writes to Finance Ministry for Suspension of IBC

The National Real Estate Development Council (NAREDCO) has requested the Ministry of Finance and Corporate Affairs for suspension of IBC provisions for one year to protect the corporate entities considering the unprecedented second wave of COVID19. The UP chapter of apex body of real estate developers has written to Nirmala Sitharaman on 25th May seeking relief for the sector. “To overcome this distressed market scenario and to protect the real estate and others sector which are reeling under acute liquidity crunch due to many external circumstances for last few years, and now COVID 19 outbreak, the Ministry of Finance and Corporate Affairs may please intervene. It may once again introduce special measures to protect corporate entities that have witnessed a sudden halt in operations and consequently defaulted on their repayment obligations, from being dragged into insolvency by suspension of the applicability of Section 7, Section 9 and Section 10 for a period of one year,” RK Arora, President NAREDCO-UP has said in his letter. NAREDCO-UP functions as development and promotion council for housing and real estate sector. Arora said that real estate industry is one of the major contributors to the economy as it provides jobs to large number of people directly and indirectly, revenue to the central and state governments by way of taxes and duties, consumes approximately 250 types of products from small and large scale industries, supporting commercial activities and providing houses to the masses. Due to the outbreak of COVID-19 in March, 2020, the GOI announced lockdown which lasted till mid-May. “During the period, the labour had deserted all the project sites and it took another 6 months to re-mobilize the manpower, equipment and resources at sites. The global spread of COVID-19 pandemic and the consequent lockdowns had adversely impacted businesses in varied sectors across the economy and especially the real estate sector,” said Arora. NAREDCO as a representative body of real estate developers had taken up the matter with the Finance Ministry, seeking adequate relief measures so as to revive the economy as a whole and real estate sector in particular. To overcome the highly distressed market scenario and to address the credit exposures of various businesses, the Ministry of Finance & Corporate Affairs had, at that time, introduced various economic relief packages and legal and regulatory measures in 2020, one of the most important being the amendments to the Insolvency and Bankruptcy Code, 2016 (IBC). Accordingly, June 5, 2020, the President of India promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 with the objective to protect corporate entities that have witnessed a sudden halt in operations and consequently defaulted on their repayment obligations, from being dragged into insolvency proceedings. “Since the COVID-19 cases are still rising rapidly and there are no sign of the situation improving anytime soon, it is expected that the construction will suffer for another next 6-8 months atleast, and even after that, it will take time to restore the material supply chain, re-mobilization of manpower and machines. Operations at all levels are more or less suspended as the government offices from where various approvals and clearances are to be obtained, is functioning with very thin staff strength. The disruption of construction has also brought the developers to a situation of serious liquidity crisis as the collections have been completely collapsed and the banks and financial institutions are not releasing funds against flats sold under their home financing arrangement. Further, no fresh booking is taking place due to the uncertainties and the sufferings due to the pandemic,” Arora said