New Delhi, May 25 (PTI) Realtors body Naredco's Uttar Pradesh chapter has demanded that the government should suspend the provisions of insolvency law for one year to protect cash-starved builders on view of a second wave of the COVID-19 pandemic.
Naredco UP Chairman R K Arora has written a letter to Union Finance Minister Nirmala Sitharaman seeking suspension of the IBC (Insolvency and Bankruptcy Code) provisions for one year to protect the corporate entities considering the unprecedented second wave of COVID-19.
He said the new sales and collections from old sales have been badly hit, leading to severe liquidity cruch in the industry.
Arora said the relief has been sought to overcome this distressed market scenario and to protect the real estate industry, which is reeling under 'acute liquidity crunch' due to the COVID-19 outbreak.
He said similar relief was given last year.
'Ministries of Finance and Corporate Affairs may please intervene and 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,' Arora said in the letter.
He said the outbreak of the second wave has hit the real estate market, which had started showing some signs of recovery.
The second wave is 'far more fatal and derailed the recovery process completely', he added.
Arora said it is expected that the construction will suffer for another next 6-8 months at least, and even after that, it will take time to restore the material supply chain, re-mobilisation of manpower and machines.
'The disruption of construction has 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,' the letter said.
Lumos Alternate Investment Advisors Managing Director and CEO Anuranjan Mohnot also made similar demand.
'Any insolvency proceedings during the peak of this pandemic will be just a futile exercise.
'Neither the affected parties like home buyers may be able to represent their case properly, nor court may view such insolvency proceedings as humane approach to deal with any financial delays,' he said.
He hoped that the government will take compassionate view and extend moratorium of insolvency law for at least one more year. PTI MJH HRS hrs