Real Estate Insolvency under IBC: Project-wise Resolution

Real estate is the sector where insolvency touches ordinary people most directly. A developer typically runs several projects, each with hundreds of homebuyers who have paid most of the price for flats not yet built. Putting the whole company into insolvency because one project failed can stall every project and leave thousands without homes. Tribunals, the IBBI and the Supreme Court have therefore developed project-wise resolution and other tools tailored to real estate. This note explains these developments.

1. Why Real Estate Is Different

• Many projects, one company. Developers often run several projects through one company, with separate approvals, land titles and buyers, so a default in one project need not mean the business as a whole is unviable.
• Homebuyers as creditors. Since 2018, allottees are financial creditors and often hold the largest voting share in the committee (Topic 8)
• What creditors want. Most homebuyers want their flats, not money; a resolution that completes construction serves them better than liquidation, which typically returns little.
• Land authorities. Development authorities that lease land to developers have claims for lease premium and can affect whether a project can be completed.

Figure 1: Development of real estate insolvency

2. Project-wise and Reverse CIRP

• Flat Buyers Association Winter Hills-77 v Umang Realtech, NCLAT, 2020. The NCLAT confined the CIRP to the project in default and allowed the promoter, who was willing to complete it, to do so as a lender, infusing funds under the supervision of the interim resolution professional and the committee, with sales proceeds kept in a separate account; this became known as a reverse CIRP.
• Rationale. Confining the process to one project protects buyers in other projects, preserves the developer's going concern and avoids the moratorium freezing healthy projects.
• Limits. A reverse CIRP depends on a promoter willing and able to fund completion, and requires close supervision to prevent misuse.

3. The IBBI's Regulations

Figure 2: Tools for real estate resolution

• 2024 amendments. Amendments to the CIRP Regulations in February 2024 allowed resolution plans to be invited and approved project by project, and required separate bank accounts for each real estate project to ring-fence its funds.
• Regulation 4E, 2025. The resolution professional may, with the approval of the committee by at least 66 per cent, hand over possession of plots, apartments or buildings to allottees who have fulfilled their obligations, during the process itself, so they need not wait for a plan.
• Regulation 18(4), 2025. The committee may invite competent authorities, such as development authorities, to its meetings to give their views on the project, without a right to vote.
• Development rights report. The resolution professional must report on the development rights and permissions needed to complete the project, to the committee and the NCLT, within sixty days of the commencement date.
• Allottee associations. The committee may relax eligibility, performance security and deposit conditions for associations of allottees that propose a plan, if they represent at least ten per cent of the class or 100 allottees, whichever is lower.
• Monitoring committees. The committee must consider setting up a monitoring committee to supervise implementation of the plan, which reports to the NCLT quarterly.

4. Mansi Brar Fernandes v Shubha Sharma, 2025

• Speculative investors. The Supreme Court held that speculative investors cannot use section 7, and laid down indicators for identifying them (Topic 8)
• Project-wise as the rule. It directed that insolvency of real estate companies should, as a rule, be resolved project-wise, so that the default of one project does not stall others.
• Other directions. Filling tribunal vacancies, escrow of project deposits, adequate resources for RERA authorities, a fund for bridge financing of stressed projects, and guidelines by the IBBI in consultation with RERA authorities for real estate insolvency, including handover of possession to willing allottees.

5. The IBBI's 2026 Proposals

Following the directions in Mansi Brar Fernandes, an IBBI committee reported in April 2026 and the IBBI issued a discussion paper inviting comments until 21 July 2026. Its proposals include allowing the committee to seek exclusion of completed or occupied projects from the CIRP, ring-fencing each project's books and accounts, easier handover of completed units to allottees who request possession, a simplified claim form for allottees, project-wise disclosures in the information memorandum, an independent assessment of construction status before inviting bids, specific contents for real estate resolution plans, allottee representation on monitoring committees, a reasoned note on alternatives before any proposal to liquidate, and coordination between resolution professionals and RERA authorities. These remain proposals until the regulations are amended.

6. RERA and the Code

• Coexistence. Homebuyers may pursue remedies under RERA and the Code; in case of conflict, the Code prevails (Pioneer Urban, 2019)
• During the moratorium. RERA proceedings against the corporate debtor are stayed, but the resolution professional must comply with RERA's requirements for the project, such as registration and use of funds.
• After resolution. The successful resolution applicant completes the project under its RERA registration, often with revised timelines approved as part of the plan.

7. Frequently Asked Questions

Can a homebuyer get possession of a completed flat while the developer is in CIRP?

Yes. Since 2025, Regulation 4E allows the resolution professional, with the approval of 66 per cent of the committee, to hand over possession to allottees who have fulfilled their obligations, without waiting for a resolution plan.

What is a reverse CIRP?

A form of project-wise resolution in which the promoter of the developer, instead of being excluded, completes the defaulting project by bringing in funds as a lender, under the supervision of the resolution professional and the committee, as allowed by the NCLAT in Umang Realtech (2020).

Does the CIRP of a developer stop all its projects?

Not necessarily. Project-wise resolution confines the process to the defaulting project, and the Supreme Court in Mansi Brar Fernandes (2025) directed that this should ordinarily be the approach.

8. Related Topics

• Topic 8: Real Estate Allottees as Financial Creditors. Homebuyers under the Code.
• Topic 27: Class Creditors and Authorised Representatives. How allottees vote.
• Topic 40: Section 30. Contents of a resolution plan.