Indian builders turn to bankruptcy courts for distressed developer acquisitions as land costs surge
Small and mid-sized Indian developers are increasingly using insolvency proceedings to acquire bankrupt real-estate firms as land prices soar in major cities. The NCLT has approved more than a dozen such acquisitions in the past quarter, with distressed real estate now seen as an acquisition opportu
MUMBAI: Small and mid-sized real-estate developers are increasingly turning to bankruptcy courts to acquire distressed property companies, seeking an alternative to buying increasingly expensive land in major cities, legal and industry sources said.
Developers that once competed for land parcels or redevelopment mandates are now bidding for companies that come with projects, development rights and, in some cases, valuable urban assets under the Insolvency and Bankruptcy Code. In the past quarter alone, the National Company Law Tribunal (NCLT) benches across the country have approved more than a dozen such real-estate acquisitions.
Last month, the bankruptcy court approved the acquisition of Radius & Deserve Land Developers by Bharadvaja Buildcon LLP, a joint venture of Aspect Group. The company had admitted liabilities exceeding ₹3,255 crore, and the successful bidder proposed a plan to revive the business. The tribunal also approved Oriental Structural Engineers' acquisition of Accil Corporation, which owns and operates the Holiday Inn Jaipur City Center and has admitted liabilities of ₹895 crore. Oriental Structural Engineers proposed paying ₹288 crore under its resolution plan; Gama Leasing and Developers, Fleur Hotels, CN Infrabuild and Gland Celsus Bio Chemicals were among other companies that had expressed interest.
In June, the tribunal in Chennai approved Amar Prakaash Developers' acquisition by Aadarsh Kumar Surana. The company had admitted liabilities of ₹1,157 crore, and about a dozen bidders had expressed interest. The NCLT also approved Pune-based Mantra Properties and Developers' resolution plan for Siddhi Raj Housing Projects after the resolution professional received interest from about 20 prospective buyers.
“The shift is reshaping the role of the insolvency process in the country's property market,” said Ruchi Khatlawala, partner at law firm Little & Co. “The increase in interest comes as land prices in established urban markets have risen sharply and redevelopment projects have attracted competition from larger developers and institutional investors.” For smaller builders, buying a distressed company through insolvency proceedings can provide a way to enter markets that would otherwise require substantial upfront spending on land, she added.
NPS Chawla, co-founder of law firm AEKOM Legal, cautioned that acquiring a distressed developer carries significant risks. “Buyers have to assess title and approval issues, pending litigation, construction obligations, and claims from lenders, homebuyers, contractors, and other creditors. A successful resolution plan doesn't guarantee that a stalled project will quickly become profitable,” he said.
The trend is particularly visible in markets such as Mumbai, Delhi-NCR and Bengaluru, where fresh land parcels are scarce and expensive. Of the 8,987 companies admitted for resolution under India's Insolvency and Bankruptcy Code through the end of March, 1,977, or about 22 per cent, were from the real-estate sector, according to the latest data from the Insolvency and Bankruptcy Board of India. The number of bidders in several such cases suggests that distressed real estate is increasingly being viewed as an acquisition opportunity rather than simply a recovery exercise for lenders.
