Proposed IBC Amendments Encouraging But Real Estate Sector Remains A Challenge: ICRA

New Delhi, Dec 29 (KNN) Credit rating agency ICRA has described the proposed amendments to the Insolvency and Bankruptcy Code (IBC) as encouraging, noting that they could improve recovery rates and reduce resolution timelines. 

However, the agency cautioned that long-standing structural issues in the real estate sector remain unaddressed.

Real Estate Sector Remains a Challenge

ICRA highlighted that the real estate and construction sector continues to account for the second-highest share of cases under the Corporate Insolvency Resolution Process (CIRP). 

Despite government efforts to protect homebuyers and resolve stalled housing projects, the proposed amendments do not include sector-specific reforms. The agency warned that benefits from the changes are likely to accrue mainly to non-real estate cases, reported ANI.

Recovery Rates and Timelines

Since its inception in October 2016, the IBC has facilitated recoveries of around Rs 4 lakh crore, outperforming other mechanisms. Yet, lenders continue to face steep haircuts, with average recoveries under successful resolution plans at 32 per cent of admitted claims through September 2025.

ICRA noted a concerning trend: recovery timelines have lengthened, with nearly three-fourths of ongoing CIRP cases exceeding 270 days post-admission, far beyond the mandated period. 

Delays at the National Company Law Tribunal (NCLT) remain a significant bottleneck, particularly as over 30,000 cases were pending as of March 2025. At the current pace, clearing these cases could take more than a decade.

Key Proposed Reforms

Among the notable amendments under consideration are group insolvency, cross-border insolvency, creditor-initiated insolvency, and allowing multiple or asset-wise resolution plans. ICRA said these could enhance outcomes, especially for companies with diversified operations.

However, the agency emphasised that strengthening the capacity of NCLT and NCLAT will be crucial to translating these reforms into faster and more effective resolutions.

Manushree Saggar, Senior Vice President, ICRA, stated, “The SCLB recommendations, if passed, are expected to improve recovery rates and reduce timelines for the CIRP process under IBC.” However, delays at the NCLT continue to be a major bottleneck.

(KNN Bureau)