IBBI Proposes Real Estate Insolvency Reforms

The Insolvency and Bankruptcy Board of India (IBBI) has proposed reforms to strengthen the insolvency resolution framework for real estate projects. The proposals are aimed at improving resolution outcomes, ensuring timely completion of stalled projects and protecting the interests of homebuyers.

The proposed reforms seek to address practical challenges in real estate insolvency cases, where delays in project completion and uncertainty over possession often affect many allottees.

1. Focus on Timely Project Completion

A key objective of the proposed reforms is to ensure that viable real estate projects are completed in a timely manner.

The framework seeks to prioritise project completion so that homebuyers can receive possession of their units without prolonged delays during the insolvency process.

2. Protection of Homebuyers

The proposals place significant emphasis on safeguarding the interests of homebuyers.

Since homebuyers are directly affected by delays in real estate insolvency cases, the proposed reforms aim to improve transparency, participation and confidence in the resolution process.

3. Project-Wise Resolution Proposed

IBBI has proposed a project-wise resolution approach for real estate insolvency cases.

This would allow different projects of the same corporate debtor to be dealt with separately, depending on their stage of completion, financial position and feasibility of resolution.

4. Ring-Fencing of Project Funds

The proposals include ring-fencing of project-specific funds.

This is intended to ensure that funds collected or available for a particular project are used for that project and are not diverted to other projects or purposes.

5. Faster Possession of Completed Units

IBBI has proposed measures to enable faster possession of completed units.

Where units are already complete or substantially complete, the process should facilitate the handover of possession to homebuyers without unnecessary procedural delays.

6. Simplified Claim Procedures

The proposals also seek to simplify claim filing procedures for homebuyers.

This would help allottees submit their claims more easily and reduce procedural difficulties during the corporate insolvency resolution process.

7. Enhanced Disclosures

IBBI has proposed enhanced disclosure requirements in real estate insolvency cases.

Better disclosures regarding project status, approvals, funds, liabilities and construction progress would help stakeholders make informed decisions during the resolution process.

8. Independent Project Assessments

The proposed framework includes an independent assessment of real estate projects.

Such assessments may help determine the actual status, viability, funding requirement and completion timeline of each project.

9. Standardised Resolution Plans

IBBI has proposed standardising resolution plans in real estate insolvency cases.

A standardised approach can improve consistency, reduce ambiguity and ensure that key project-related aspects are appropriately addressed in the resolution plan.

10. Greater Stakeholder Participation

The reforms seek to increase stakeholder participation, especially by homebuyers and other affected parties.

Greater participation can improve transparency and help ensure that the resolution process considers the concerns of those directly impacted by the project.

11. Coordination with RERA Authorities

IBBI has proposed stronger coordination with the Real Estate Regulatory Authority (RERA) authorities.

This coordination is important because real estate projects are also subject to RERA registration, compliance and monitoring requirements.

12. Additional Safeguards Before Liquidation

The proposals include additional safeguards before a real estate company or project is pushed into liquidation.

This is intended to ensure that liquidation is considered only after determining whether project completion or resolution remains feasible.

13. Objective of the Reforms

The proposed reforms aim to:

• Improve resolution outcomes in real estate insolvency cases;
• Ensure timely completion of stalled projects;
• Protect the interests of homebuyers;
• Prevent diversion of project-specific funds;
• Improve transparency through enhanced disclosures;
• Promote practical and project-specific resolution; and
• Strengthen coordination between IBC and RERA frameworks.

14. Expected Impact

The proposed reforms are expected to make real estate insolvency resolution more practical and homebuyer-focused. They may help revive stalled projects, improve possession timelines, enhance transparency and reduce uncertainty for allottees.

15. Key Takeaway

IBBI has proposed reforms for real estate insolvency resolution with a focus on timely project completion and protection of homebuyers. The proposals include project-wise resolution, ring-fencing of project funds, faster possession of completed units, simplified claim procedures, enhanced disclosures, independent project assessments, standardised resolution plans, greater stakeholder participation, stronger coordination with RERA authorities and safeguards before liquidation.