IBBI tightens insolvency rules for real estate projects, strengthens homebuyer protection

The Insolvency and Bankruptcy Board of India (IBBI) has tightened the insolvency resolution framework for real estate companies, introducing project-wise financial monitoring, greater disclosure requirements and a larger role for homebuyers in the resolution process.

The amendments, notified on October 30, are aimed at facilitating more informed and viable resolution of real estate projects, improving transparency and accountability, and protecting the interests of homebuyers and other stakeholders.

Under the revised Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2026, separate bank accounts will have to be maintained for each real estate project of a corporate debtor undergoing insolvency proceedings. Resolution professionals (RPs) will also be required to submit project-wise statements of receipts and payments to the Committee of Creditors (CoC) at intervals decided by the committee.

The amendments also provide for the possibility of excluding individual real estate projects from the corporate insolvency resolution process (CIRP). In cases where a company has multiple projects, the RP will have to present project-wise details, including RERA registration, construction status, possession and occupancy status, and completed and incomplete units, at the first meeting of the CoC.

Based on this information, the CoC can recommend exclusion of a project from CIRP to the adjudicating authority, provided the proposal secures at least 66% of the voting share. The recommendation must be accompanied by recorded reasons.

In another significant change, the RP, with prior approval of the CoC, will have to appoint independent professionals to assess the technical status and cost of completing each project before inviting expressions of interest from prospective resolution applicants.

The assessment will cover construction progress, regulatory approvals, sold and unsold inventory, estimated completion costs, funding requirements, timelines and risks. The report will form part of the Information Memorandum and be made available to prospective bidders.

The regulator has also expanded disclosure requirements in the Information Memorandum. These will include project-wise details of sanctioned, completed and under-construction units, inventory, construction progress, statutory approvals, encumbrances, lender-wise charges, pending litigation, regulatory proceedings, penalties and complaints, as well as balances in designated RERA bank accounts.

The framework also seeks to improve homebuyers’ representation in insolvency proceedings. Authorised representatives (ARs) of creditors in a class, including homebuyers, will have to provide their brief profiles and details of their roles and responsibilities when their names are offered for selection. Minutes of their meetings with creditors will have to be submitted to the RP and placed before the CoC. The CoC meeting minutes will also record the views and concerns raised by these representatives.

Further, monitoring committees set up to oversee implementation of resolution plans for real estate companies will include the AR of creditors in a class or another representative of allottees chosen by majority vote. Representatives of the concerned RERA and competent authority may also be included, subject to their agreement.

The amendments also require resolution plans to spell out project-wise details of units, treatment of homebuyers’ claims, and timelines for construction and delivery of possession. Plans will have to specify how claims of allottees will be addressed, including through possession, execution of conveyance deeds, registration or transfer of title, refunds or other appropriate means.

To facilitate faster delivery of homes, the CoC has been given flexibility to approve requests from homebuyers for handover of possession of plots, apartments or buildings and facilitate registration under Regulation 4E. It can either approve requests individually or grant an in-principle approval authorising the RP to process requests as and when they are received during CIRP.

The amendments also clarify that the RP will continue to discharge responsibilities under CIRP until the adjudicating authority decides an application for withdrawal under Section 12A of the Insolvency and Bankruptcy Code. Confidentiality requirements have also been extended to valuation reports, besides fair value and liquidation value.

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