The Insolvency and Bankruptcy Board of India (IBBI) has proposed comprehensive project-wise real estate insolvency reforms to prioritise housing project completion over liquidation. According to the discussion paper released on Tuesday, these reforms include excluding certain projects—such as occupied, completed or ongoing ones—from the insolvency resolution process in the real estate sector, along with a framework for project-wise ring-fencing of cash flows. The Committee on Framing Guidelines for Insolvency Proceedings in the Real Estate Sector has recommended that insolvency proceedings should ordinarily be conducted on a project-wise basis, recognising each real estate project as a distinct economic unit. These reforms are part of a broader trend towards sector-specific insolvency frameworks, with the government also exploring similar frameworks for insurance companies under the IBC to protect policyholders. As per The Economic Times, the proposed reforms are guided by the objectives of prioritizing project completion over liquidation, ensuring transparency for homebuyers, strengthening accountability of insolvency professionals, and enabling viable resolution of real estate projects.
To facilitate expeditious handover of completed housing units to allottees, the discussion paper suggests that resolution professionals should be allowed to hand over possession without CoC approval for projects completed before insolvency commencement. Alternatively, an in-principle approval of the Committee of Creditors (CoC) can be obtained for such unit handovers. The Supreme Court had previously directed IBBI to devise a mechanism enabling possession handover to willing allottees where substantial numbers of units are complete. IBBI has also proposed identification and disclosure of allottee preferences in real estate corporate insolvency resolution processes, with allottees classified based on relief sought—some seeking project completion and unit possession, while others may seek conveyance document execution or refund of amounts paid. According to The Economic Times, the regulator has proposed simplified claim forms for real estate allottees to streamline the process. However, insurance policyholders may not necessarily receive rights equivalent to homebuyers in the real estate insolvency regime, as homebuyers have had the tag of financial creditors since 2018 and a Supreme Court ruling in February this year further buttressed their position.
The insolvency regulator has recommended mandating additional project-wise disclosures in Information Memorandums to provide comprehensive project status and facilitate informed decision-making by resolution applicants, creditors and homebuyers. These disclosures would include minimum mandatory contents for resolution plans relating to real estate projects, such as allottee treatment, implementation milestones, timelines for completion and delivery, and consequences of allottee default. The IBBI panel has noted the need for inclusion of homebuyers and representatives of concerned Real Estate Regulatory Authority in monitoring committees overseeing resolution plan implementation. Additionally, the proposed insurance insolvency framework is expected to introduce sector-specific provisions covering policyholder protection, with the framework likely proposing the formation of an advisory committee constituted by the IRDAI to assist during the insolvency process. According to The Economic Times, the reforms also include mandatory contents of resolution plans in real estate cases and independent technical and cost-to-complete assessment for real estate projects.
IBBI has proposed a comprehensive project-wise exclusion framework where the Committee of Creditors (CoC) can classify projects into occupied projects, completed projects, substantially completed projects or ongoing projects based on inputs provided by the resolution professional. The CoC can then use any other criteria for classification as well, and identify whether any project does not require insolvency resolution and should be excluded from the bankruptcy process. If the CoC decides, with at least a 66% vote share, that a particular project should be excluded from the corporate insolvency resolution process, it can authorise the resolution professional to approach the adjudicating authority to seek the exclusion. As per The Economic Times, this proposal seeks to facilitate project-wise treatment of real estate insolvencies, minimise disruption to occupied and completed projects, and promote resolution efforts focused on projects that genuinely require insolvency resolution intervention. Earlier this year, a panel set up by IBBI had suggested restricting bankruptcy proceedings to only the stressed projects of a property developer instead of extending it to the entire company as is the current practice.
According to IBBI data, 22% of all insolvency cases admitted till March 31, 2026, are from the real estate sector, accounting for 19% of all liquidations commenced and 18% of resolution plans under the Insolvency and Bankruptcy Code. The Supreme Court had directed IBBI in September 2025 to frame sector-specific guidelines for real estate insolvency. Public comments on the proposed changes have been invited until July 21, 2026, providing stakeholders an opportunity to provide feedback on the comprehensive reform framework. The Supreme Court had, in the Mansi Brar case last year, observed that real estate insolvency should, as a rule, proceed on a project-specific basis rather than against the entire corporate debtor, barring exceptional circumstances. The apex court also held that real estate insolvency must prioritise completion of projects and protection of genuine homebuyers and provide recognition to their right to shelter. Meanwhile, the need for a separate insurance insolvency framework stems from a long-standing gap, as while insurance companies are classified as "financial service providers" under the IBC, the government is yet to implement the relevant adjudicating rules for the sector notified in 2019. As a result, distressed insurance companies continue to be dealt with under the Insurance Act, 1938 instead of the IBC.
