If you have bought a flat in a project that was never completed, you know how helpless it feels when the builder stops work and your calls go unanswered. For years, homebuyers tried everything—consumer courts, complaints under the Real Estate (Regulation and Development) Act, 2016 (RERA), and later, the Insolvency and Bankruptcy Code, 2016 (IBC). Each of these legal remedies gave some hope, but no one delivered what mattered most: the keys to your home. These remedies could offer you your money back, but it could not give you the flat you dreamed of when you signed that builder-buyer agreement.
In September 2025, the Hon’ble Supreme Court in Mansi Brar Fernandes v. Shubha Sharma directed the Insolvency and Bankruptcy Board of India (IBBI) to create rules specifically for the real estate sector, which could focus on completing stalled projects, protecting homebuyers, and ensuring that finished flats are handed over. The IBBI formed a committee which gave its recommendations and a discussion paper was issued by IBBI proposing changes to how stalled housing projects can be managed during CIRP. The core idea of the recommendations/proposal is simple: stop treating real estate like any other failing business. Instead of focusing only on recovering money for creditors, the focus should be on completing the project and giving people their homes.
A developer often has multiple projects running at once, some completed, some partly occupied, some barely past the foundation stage. Under the IBC, when a developer’s company (Corporate Debtor/CD) is admitted into the Corporate Insolvency Resolution Process (CIRP), every project of that CD gets pulled into the same proceedings. Families already living in flats suddenly find themselves caught up in legal processes they have nothing to do with. The new proposals would allow these unaffected projects to be separated out, so that people who have already moved in are not left worrying about what will happen next.
What the new proposals say
The new proposals introduce a simple claim form where every homebuyer can say what they want: possession of their flat, registration of the property in their name, a refund, or any other relief. These preferences would be shared with potential Resolution Applicants (RAs), i.e., parties interested in taking over and reviving the stalled project. This way, anyone stepping in to complete the project knows exactly what homebuyers are expecting.
The IBBI recommends that, immediately after a real estate CD is admitted into CIRP, the Resolution Professional (RP) and Committee of Creditor (CoC) should appoint an independent technical agency, such as a firm of engineers or quantity surveyors. This agency would conduct a comprehensive audit covering:
Construction progress: the physical status of the project, assessed tower by tower and unit by unit;
Cost to complete: detailed estimates based on current market rates;
Statutory approvals: the status and remaining validity of approvals, including fire, environmental, and height clearances; and
On-site materials: a complete inventory of construction materials available at the project site.
This Technical Assessment Report will form part of the Information Memorandum (IM) provided to prospective RAs so they can evaluate the project. This gives PRA(s) a clear, independent picture of the project and the funds needed to complete it, rather than forcing them to rely solely on figures supplied by the developer or the CoC.
Under the present IBC framework, even if a flat is ready, handing it over to the homebuyer requires approval from the CoC. The new proposals offer a faster path: if any unit is complete on the date the CIRP began, the RP could hand it over to the allottee without waiting for a formal CoC vote. For allotees, whose units were complete for physical possession but locked behind procedural requirements, this could make all the difference.
Under RERA, developers must keep dedicated bank accounts where homebuyer payments are deposited and can only be used for that specific project. However, when a company enters CIRP, these accounts often get frozen. The IBBI proposes that these accounts should instead remain operational so they can continue to receive homebuyer payments and fund the construction. The RP would operate these accounts in strict compliance with RERA requirements, subject to several safeguards: withdrawals would be permitted only for construction and land costs of the specific project; each withdrawal would require certification by a Chartered Accountant and an engineer; where the developer has more than one project, the RP would maintain a separate bank account for each; and funds could be transferred from one project to another only with the approval of the CoC of the contributing project.
The proposal also recommends that before recommending liquidation, CoC and RP must record the detailed reasoning for such recommendation in the minutes including the other options like approaching new developers, considering homebuyer-led revival plans, etc. were considered.
These proposals would help developers who are genuinely struggling to complete their projects. Their healthy projects can be kept out of insolvency proceedings, and clear cost data makes it easier to attract serious bidders. However, for promoters who have misused funds or hidden information, these rules leave fewer places to hide.
At its heart, the IBBI’s proposal is about a simple shift in thinking. Real estate insolvency should not be about collecting money and moving on. It should be about finishing homes and keeping promises.
(The author is Senior Partner, S&A Law Offices. Views are personal.)