INTRODUCTION:

Real estate insolvencies occupy a unique position under the Insolvency and Bankruptcy Code, 2016 (“IBC”), as homebuyers (unlike conventional financial creditors) primarily seek possession of their homes rather than monetary recovery. This structural peculiarity has repeatedly underscored the need for sector‑specific interventions aimed at safeguarding homebuyers’ interests while ensuring timely completion of stalled projects. In the wake of the Supreme Court’s decision in Mansi Brar Fernandes v. Shubha Sharma & Ors.[1] (“Mansi Brar Fernandes”), the Insolvency and Bankruptcy Board of India (“IBBI”) has released a discussion paper for strengthening resolution outcomes in real estate insolvency proceedings (“CIRP”), proposing significant reforms to the insolvency framework applicable to real estate developers. Recognising the unique challenges faced by the homebuyers, the IBBI has proposed a series of reforms focused on project-wise resolution, protection of homebuyers, enhanced transparency, improved stakeholder participation and project completion over liquidation.

The discussion paper proposes 13 reforms aimed at enhancing transparency, stakeholder participation, and project completion in real estate insolvencies. Key measures include empowering the CoC to exclude completed or occupied projects from CIRP, mandating project-wise accounts and dedicated bank accounts, facilitating handover of completed units, introducing a simplified claim process for homebuyers, requiring independent technical and cost-to-complete assessments, ensuring representation of allottees and regulators on monitoring committees, and obligating RPs to evaluate and present project completion alternatives before recommending liquidation. The last date for submission of comments is 21^st July 2026.

Stakeholders are invited to review these proposals and provide their feedback.

PROPOSED REFORMS:

The discussion paper proposes a comprehensive set of reforms aimed at improving resolution outcomes in the real estate sector by prioritising project completion, enhancing transparency, protecting homebuyers and strengthening stakeholder participation. The key reforms are discussed below:

Proposal 1: Project-wise Treatment of Real Estate Insolvency

To facilitate project-wise treatment of real estate insolvencies, minimise any delay and/or disruption to completed, substantially completed and occupied projects, and promote resolution efforts focused on projects that genuinely require insolvency resolution intervention, the proposed framework adopts a project-wise approach to real estate insolvency, whereby:

• the CoC may assess each real estate project separately;
• completed, occupied or substantially completed projects may be identified for exclusion from CIRP; and
• such exclusion may be authorised by the CoC with at least 66% voting share.

Proposal 2: Ring-Fencing of Project Funds

Stakeholders have time and again flagged difficulty tracking project-specific cash flows, receivables and expenditures, eroding homebuyer confidence in how funds are used. The proposed framework seeks to strengthen project-wise financial discipline by:

• maintaining separate books of accounts for each real estate project;
• routing all project-related receipts and payments through dedicated bank account maintained for that project; and
• requiring project-wise financial disclosures to the CoC and compliance with RERA fund utilisation requirements.

Proposal 3: Faster Possession for Eligible Allottees

The Supreme Court of India in Mansi Brar Fernandes (supra) specifically directed IBBI to build a mechanism enabling handover where substantial units are complete. The proposed framework seeks to facilitate timely delivery of completed units and reduced delays in delivery of possession to eligible allottees by:

• Either permitting the RP to handover of completed units without prior CoC approval where the allottee has fulfilled its contractual obligations; or
• Allowing the CoC to grant a one-time in-principal approval to the RP for processing possession requests during CIRP.

Proposal 4: Simplified Claim Form for Homebuyers

Real estate CIRPs often involve multiple allottees with limited familiarity with insolvency procedure, leading to errors and incomplete filings of claim form. Therefore, IBBI has proposed an allottee-specific claim form (Form CA-R) to simplify claim submission by homebuyers. The proposed form captures:

• allottee and project details;
• unit and payment-related information;
• possession status of the unit; and
• the nature of relief sought, including possession, registration or refund.

Proposal 5: Disclosures of Homebuyer preferences in CIRP

Allottees vote as a single class in the CoC, but their underlying expectations differ while some want possession, others a refund or conveyance. A new clause (jb) under Regulation 36(2) of the IBC would require the information memorandum to disclose, for each project, the number of allottees seeking: (i) possession, (ii) refund, (iii) conveyance/registration/title transfer, (iv) any other relief, and (v) those who haven’t indicated a preference sourced from Form
CA-R.

Proposal 6: Mandatory disclosures in Information Memorandum

A new clause (hb) under Regulation 36(2) of the IBC would mandate following project-wise disclosures of total sanctioned units split into completed/under-construction, sold/unsold inventory, percentage construction completion (including common areas/amenities), and the status of every statutory approval indicating those obtained, pending, expired, or due for renewal.

Proposal 7: Early Technical and Financial Assessment for each Project

Resolution plans for real estate projects live or die on accurate cost-and-timeline estimates. Without a credible, independent baseline, applicants and creditors evaluate competing bids on shaky ground. Regulation 4F of the IBC requires the RP to appoint independent professionals (with CoC approval) to conduct a project-wise assessment before the expression of intent / request for resolution plan stage, covering: construction status and percentage completion, approvals/compliance status, sold/unsold inventory, cost-to-complete, milestone-wise funding needs, realistic delivery timelines, and material completion risks. The assessment becomes part of the IM, and its cost is added to CIRP costs.

Proposal 8: Mandatory Contents of Real Estate Resolution Plans

Regulation 38A is proposed to be substituted, to require every real estate resolution plan i.e. a plan related to a corporate debtor who is a developer, to specify:

• unit-wise breakup (sanctioned/constructed/sold/unsold);
• allottee treatment (possession, conveyance, refund, or other relief);
• treatment of allottees who never filed claims;
• project/phase/tower-wise delivery timelines;
• consequences of allottee default, and periodic progress reporting to the Monitoring Committee; and
• submission of periodic reports including progress reports to the Monitoring Committee.

Proposal 9: Greater Role for Homebuyers and Regulators in Monitoring Committee

To strengthen implementation of resolution plans in real estate insolvencies, the proposed framework seeks to introduce a proviso to Regulation 38(4)(b) of the IBC, requiring inclusion of the additional stakeholders in the monitoring committee, which is responsible for implementation of the resolution plan, monitoring project completion, and protecting stakeholder interests following approval of the plan. The proposed members include:

• the authorised representative of allottees or an allottee representative chosen by them;
• a representative of the concerned RERA authority; and
• a representative of the relevant land or development authority, where such authorities agree to participate in the monitoring committee.

Proposal 10: Enhancing Transparency in Functioning of Authorised Representatives

To improve transparency and informed participation of creditors in a class, the proposal requires disclosure of profiles of proposed Authorised Representatives (“ARs”) and their roles at the public announcement stage. It also mandates ARs to submit records of consultations held with creditors for placement before the CoC and requires CoC minutes to specifically record the views, concerns and opinions communicated by the AR on behalf of such creditors.

Proposal 11: Safeguards Before Liquidation

The proposed framework seeks to ensure that liquidation remains a measure of last resort by:

• requiring the RP to place before the CoC a detailed note on efforts undertaken to identify completion-oriented solutions;
• considering proposals from developers, investors, funders and allottees for project completion; and
• recording the reasons for concluding that liquidation is the most feasible course of action before recommending liquidation.

Proposal 12: Improved Coordination with RERA

The proposed framework seeks to strengthen coordination between RP and RERA authorities by:

• facilitating access to project registrations, sanctioned plans and allottee records;
• obtaining information relating to escrow accounts, approvals and regulatory compliances; and
• ensuring continued compliance with applicable RERA requirements during the CIRP.

Proposal 13: Disclosure of CIRP at project and site offices

The proposal seeks to ensure that when a real estate company enters CIRP, clear notices are displayed at all its project sites and offices. This will help homebuyers, contractors, suppliers, and other stakeholders become aware of the insolvency process, know whom to contact (the IRP/RP), and submit their claims on time, thereby improving transparency and communication during the resolution process.

CONCLUSION:

In our view, the discussion paper represents one of the most comprehensive attempts by IBBI to create a sector-specific insolvency framework for real estate developers. The proposals appropriately recognise that the principal objective in real estate insolvency is not mere debt recovery but completion and timely delivery of projects.

The reforms, relating to project-wise treatment, fund ring-fencing, technical assessment of completion costs and stakeholder participation, merit strong support. However, the final framework should ensure that the reforms do not inadvertently undermine CoC commercial wisdom, create regulatory overlap with RERA, or leave unresolved the critical challenge of completion financing. Subject to these refinements, the proposed amendments are likely to materially strengthen resolution outcomes in the real estate sector and improve confidence in the insolvency ecosystem.

Authors:

Disclaimer: 

This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein.

[1]  2025 INSC 1110