India's bankruptcy watchdog proposes reforms to expedite real estate insolvency, prioritizing project completion and enhancing transparency for homebuyers.
New Delhi, India Jul 1, 2026 ALN: The Insolvency and Bankruptcy Board of India (IBBI) has proposed significant reforms aimed at streamlining real estate insolvency regulations. These changes are designed to expedite the insolvency resolution process in the real estate sector, particularly benefiting homebuyers.
Among the proposed reforms is the exclusion of completed or unaffected housing projects from the insolvency rescue process, contingent upon the approval of financial creditors. This initiative aims to focus on projects that genuinely require intervention, thereby minimizing disruption to ongoing developments.
Additionally, the IBBI has suggested implementing project-wise cash flow management. This would involve mandating resolution professionals to maintain separate accounts for each project, ensuring that all financial transactions related to a project are conducted through designated bank accounts. This measure is intended to curb the diversion or misuse of funds.
The proposed reforms also include several measures to enhance transparency for homebuyers and strengthen the accountability of insolvency professionals. Key changes include:
These measures are guided by the objectives of prioritizing project completion over liquidation and ensuring that homebuyers' rights are protected throughout the insolvency process.
The IBBI has invited feedback from stakeholders on the discussion paper outlining these proposals, with a deadline set for July 21. This engagement is crucial for refining the proposed regulations and ensuring they meet the needs of all parties involved.
In its first meeting, the Committee of Creditors (CoC) will conduct a project-wise assessment of all projects associated with a real estate firm. This assessment will be based on inputs from the resolution professional, allowing the CoC to classify projects into categories such as occupied, completed, substantially completed, or ongoing. Projects deemed unnecessary for insolvency resolution can be excluded from the process with a 66% vote from the CoC.
The IBBI stated, “This proposal seeks to facilitate project-wise treatment of real estate insolvencies, minimize disruption to occupied and completed projects, and promote resolution efforts focused on projects that genuinely require insolvency resolution intervention.”
Earlier this year, a panel established by the IBBI recommended restricting bankruptcy proceedings to only the stressed projects of a property developer. This approach would allow solvent projects to continue operating under existing arrangements, benefiting a larger number of homebuyers.
Furthermore, the Supreme Court, in the Mansi Brar case last year, emphasized that real estate insolvency should generally proceed on a project-specific basis rather than against the entire corporate debtor, barring exceptional circumstances. The court also highlighted the importance of prioritizing project completion and protecting the rights of genuine homebuyers.
The IBBI's proposed reforms represent a significant shift in how real estate insolvency is managed in India. By focusing on project completion and enhancing transparency, these changes aim to protect homebuyers' interests while ensuring a more efficient insolvency resolution process. Stakeholder feedback will play a critical role in shaping the final regulations.
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