The government’s proposed bill to overhaul the insolvency and bankruptcy code (IBC) has largely ignored the stress in the real estate sector, said a report by ICRA. The agency said that the real estate sector-specific reforms have not been addressed in the current proposals despite real estate and construction sector accounting for the second highest share in cases ongoing insolvency cases.
“ICRA believes that structural reforms would be needed for the real estate sector as protecting homebuyers and resolution of stuck housing projects has been a focus area for the government,” it said.
Ratings agency on proposed amendments
Overall, the ratings agency said that the proposed amendments to IBC will reduce recovery timelines and improve recovery rates for lenders.
Recently, a select committee on the IBC suggested permitting more than one resolution plan, enabling asset-wise or business vertical-wise resolution of a distressed company. Also, the panel has approved the draft Bill’s intent to codify “Clean Slate” principle, a mechanism that provides protection to the successful bidder against past claims, including those from statutory authorities, so that the new promoter starts on a fresh footing. The committee has also recommended a statutory timeline of three months for the National Company Law Appellate Tribunal (NCLAT) to pass orders.
ICRA on delays at NCLT
While all these measures are positive, ICRA noted that there are delays at NCLT (National Company Law Tribunal), which have not been specifically addressed. “As of March 2025, there are over 30,000 IBC cases pending before NCLT and basis the existing capacity of the NCLT, it is expected to take more than a decade to conclude these cases. While the number of fresh cases being admitted to NCLT has been coming down, ICRA notes that there has not been much traction in approval of resolution plans with only 105 plans approved in first half of FY26 against 124 in corresponding period last year,” the report said.
However, the ratings agency stated that the introduction of a ‘creditor-initiated insolvency resolution process’, an out-of-court initiation mechanism to facilitate faster and more cost-effective insolvency resolution, would reduce the burden of the exiting judicial system.
In over nine years, the IBC has delivered better realisations for creditors over other recovery modes (DRT, SARFAESI) with total recovery of around Rs 4 lakh crore. Till September 2025, an overall 8,658 corporate debtors have been admitted, of which 63% of the insolvency cases have been resolved either through a successful resolution plan or withdrawal or liquidation.
But the lenders had to take steep haircuts with a limited recovery of 32% recorded through successful resolution plans.