Realtors in Uttar Pradesh lobby for new policy to resolve insolvencies quicker

Real estate developers and industry bodies have urged the Uttar Pradesh government to come up with a pragmatic policy for the industrial development authorities of the state, especially Noida and Greater Noida, so that they can take quick decisions with respect to the projects undergoing the insolvency process.

Resolutions of multiple projects are on hold as the authorities want to be financial creditors instead of operational creditors so that they can have the voting rights and also don’t have to take a haircut in stuck projects.

Experts said with authorities claiming full amount including the interest, the projects become unviable.

“To expedite resolution of the insolvency cases, particularly in Noida and Greater Noida region, a pragmatic policy framework to tackle the ballooned land dues of industrial development authorities in these projects is needed,” said Sahil Vachani, MD and CEO at Max Ventures and Industries Ltd. “In the absence of such a policy, the turnaround of the insolvent corporate debtors is economically infeasible.”

According to Confederation of Real Estate Developers’ Associations of India (CREDAI), around 190,000 units amounting to a valuation of Rs 1 lakhcrore are stuck in Noida, Greater Noida and Ghaziabad. In Greater Noida alone, at least 36 realty projects are facing insolvency proceedings.

This has impacted around 50,000 home buyers and blocked about Rs 7,000 crore worth of authority dues.

CREDAI and CII had written to the UP government in May, requesting the same.

Experts say if the stuck insolvency cases are resolved, it will restart the investment cycle in these areas.

“Authorities like Noida and Greater Noida need to be cognizant of the fact that the dues payable to them by the developers are in the nature of operational debt, and it makes them operational creditors,” said Abhishek Tripathi, managing partner, Sarthak Advocates and Solicitors. “This position has been held as such by NCLAT in the judgment of Noida v. Anand Sonbhadra, earlier this year.”

Tripathi said the past dues of the authority have to be treated as per the resolution plan approved by the committee of creditors and NCLT.

Experts say insistence on interest, penalties and other dues may ultimately make entire resolution plans financially unviable.

Developers owe dues of about Rs 40,000 crore to the three different authorities in NCR—Noida, Greater Noida and Yamuna—since 2010 but the amount is likely to be reduced to Rs 25,000 croreas per new interest rate.

“Resolution of most insolvent projects in the area is held up as prospective resolution applicants are not sure of the financial liability on the project,” said Pankaj Bajaj, president, CREDAI-NCR.

As per CREDAI’s letter, there are several real estate developers undergoing corporate insolvency resolution process like Jaypee Infratech, Amrapali, BPPL, Granite Gate and Subhkamna Buildtech, among others.

CREDAI had also said that if development authorities continue to contest resolution plans in the courts without applying a pragmatic decision-making frame dealing with issues highlighted above, it would not only delay the process but finally lead to liquidation.