A panel that’s been formed to examine the challenges in real estate-specific insolvency cases has recommended that the resolution process for stressed assets of real-estate companies has to be conducted on a project-wise basis as against the current practice of taking the entire company into insolvency.
“Corporate insolvency resolution process (CIRP) in the real estate sector should ordinarily be admitted on a project-wise basis with each real estate project treated as an independent unit for the purposes of insolvency admission and resolution. Admission of CIRP may be confined to the defaulting project, and solvent, completed or unrelated projects of the same developer may not be included. The ministry of corporate affairs (MCA) may consider enabling project-wise admission of CIRP for real estate cases,” the panel said in a report.
The committee, which was constituted by the Insolvency and Bankruptcy Board of India (IBBI), has also suggested that the resolution plans for a real estate project undergoing insolvency proceedings has to mandatorily give options to homebuyers to choose between taking the possession of the unit, or exit through refund of the amount paid.
However, to prevent the misuse of homebuyer-centric measures, the committee said that the adjudicating authority (AA) must examine the the nature of the transaction to distinguish “genuine” homebuyers from “speculative” investors at the stage of admission.
Curbing Speculation
“A recurring concern in real estate insolvency proceedings is the perceived misuse of the IBC by certain allottees who are characterised as “speculative investors” rather than “genuine homebuyers” seeking possession of residential units. The committee is of the considered view that the issue of differentiation between a “genuine” or “speculative” applicant for real estate cases merits examination, given the socio-economic significance of this sector,” the report said.
Through an exhaustive list of recommendations, the panel said that all allottees whose details are reflected in the books of the corporate debtor, project records, RERA records or information utility (IU) records – whether or not they have formally filed claims – must be duly provided for in the resolution plan.
The report, released on April 8, said that the MCA might consider enhancing the minimum threshold amount of default for starting an insolvency process in real estate projects from Rs 1 crore to Rs 5 crore.
“The committee believes that such recalibration would more accurately reflect the capital structure and economic magnitude of real estate development, reduce premature or tactical admissions, promote exploration of completion-oriented solutions outside insolvency, and reserve the CIRP mechanism for cases involving substantial financial stress warranting collective intervention under the IBC,” the report said.
The panel was formed after the Supreme Court, in its September 2025 judgment on Mansi Brar Fernandes, issued directions aimed at setting in place a completion-centric and homebuyer-focused approach to insolvency proceedings in the real estate sector.
Empowering RERA
To empower Real Estate (Regulation and Development) Act or RERA, the committee said that RERA authorities might be enabled to nominate representatives in the committee of creditors’ (COC) meetings as observers. Further, the RERA authorities might be consulted during preparation and evaluation of resolution plans for regulatory feasibility, and could be provided an opportunity to submit their views on the same.
“IBBI should establish a formal consultation mechanism with central and state RERA authorities for real estate insolvency matters, including periodic coordination meetings and designated nodal officers,” it added.
Additionally, the report prescribes resolution professionals (RPs) to follow certain rules to reduce friction. For instance, it suggested RPs to maintain project-wise accounts, with withdrawals linked to construction milestones and approved budgets. “Cash-flow tracking and periodic disclosure by the RP to the CoC, homebuyers (through the ARs), and the AA be mandated. The committee recommends that, provided that where a unit in a real estate project is complete on or before the insolvency commencement date, the regulatory framework may be further liberalised to permit the RP to hand over possession of substantially completed units to eligible allottees, without requiring prior approval of the CoC,” it said.