Small developers turn to insolvency courts as land costs push distressed real estate into focus

Mumbai: Several small and mid-sized real-estate developers are increasingly looking to the bankruptcy courts to acquire distressed property companies, seeking an alternative to buying increasingly expensive land in major cities.

Developers that once competed for land parcels or redevelopment mandates are now bidding for companies, which come with projects, development rights, and, in some cases, valuable urban assets, under the Insolvency regime. 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.

NPS Chawla, co-founder of law firm AEKOM Legal, said redevelopment has become an increasingly competitive segment, drawing large developers with deeper balance sheets.


"Still, acquiring a distressed developer can carry 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," said Chawla.

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.

"NCLT acquisitions can provide access to established projects and development rights, while also bringing the responsibility of addressing underlying operational and execution challenges. Such opportunities require careful due diligence, particularly around approvals, liabilities and the status of project execution, before taking on the asset," said Sandeep Shetye, president, business development, Aspect Real Estate Developers.

The trend is particularly visible in markets such as Mumbai, Delhi-NCR, and Bengaluru, where fresh land parcels are scarce and expensive.

"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."

According to her, 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.

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%, 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.

The tribunal recently also approved Oriental Structural Engineers' acquisition of Accil Corporation. The Jaipur-based company 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 okayed 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 in acquiring it. The NCLT 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.