New IBBI Regulations Enable Project-Wise Insolvency for Real Estate Developers
New framework protects healthy projects from developer-wide insolvency proceedings to safeguard homebuyers.
1Shift in Insolvency Scope
The IBBI's Fifth Amendment to the Corporate Insolvency Resolution Process regulations, notified on October 30, 2026, fundamentally alters how real estate bankruptcies are handled. Previously, a developer's default in one project triggered insolvency for the entire company. Now, the Committee of Creditors can isolate and exclude financially healthy projects from the broader resolution process.
2Mechanism for Project Exclusion
To exclude a healthy project, the Committee of Creditors must secure a 66% voting majority. Following this vote, the resolution professional submits a formal application to the National Company Law Tribunal for final approval. This process ensures that viable projects continue construction, funding, and possession activities without being dragged into the developer's wider financial distress.
3Mandatory Financial Ring-fencing
New regulations enforce strict compliance with Real Estate Regulatory Authority fund utilization norms. Developers must maintain separate bank accounts for every individual project to prevent the diversion of funds. This ensures that capital raised for a specific development is exclusively used for that project, providing a critical layer of financial security for allottees.
4Enhanced Transparency Requirements
Resolution professionals must now provide comprehensive project-wise disclosures in the Information Memorandum. This includes detailed data on sanctioned units, sold and unsold inventory, statutory approvals, and ongoing litigations. By requiring independent technical and cost assessments, the framework reduces information asymmetry, allowing prospective suitors to make more informed and realistic bids for stressed assets.
5Protecting Homebuyer Interests
The amendment mandates that the Information Memorandum includes allottees who have not filed formal claims but appear in company or Rera records. This ensures that homebuyer rights are protected regardless of their individual claim status. Furthermore, authorized representatives now have a stronger voice, with their concerns formally recorded in all Committee of Creditors meeting minutes.
6Expediting Possession Timelines
The Committee of Creditors is now empowered to grant in-principle approval for the handover of plots and apartments. This allows for possession and registration without requiring individual approvals for every single buyer. By focusing on tower-wise delivery timelines, the process aims to significantly reduce the long delays that have historically plagued real estate insolvency cases.
7Addressing Sectoral Insolvency Data
Real estate currently accounts for 22% of all ongoing bankruptcy cases in India, second only to manufacturing at 36%. As of September 2025, 553 real estate cases were admitted, with 221 still in progress. These cases involve over 108,887 homebuyers, many of whom have faced years of uncertainty due to prolonged resolution timelines in the NCLT.
8Impact on Future Resolutions
While these regulations take immediate effect, their application to cases admitted before October 30 remains subject to judicial interpretation. By limiting the moratorium to defaulting projects, the framework preserves the operational continuity of healthy assets. This structural change is designed to improve transparency, speed up home delivery, and restore confidence in the real estate sector.