News: IBBI Panel Wants Project-Wise Realty Insolvency-08-04-2026

A committee of the Insolvency and Bankruptcy Board of India (IBBI) has recommended that insolvency in the real estate sector move from an entity-centric, recovery-focused framework to a project-centric approach geared to completing homes, with closer coordination between the Insolvency and Bankruptcy Code (IBC) and the Real Estate (Regulation and Development) Act, 2016.

The Committee on Framing Guidelines for Insolvency Proceedings in the Real Estate Sector submitted its report to IBBI chairperson Ravi Mital on April 7, 2026, and it was released on April 8. It examined 55 key issues and made 155 recommendations on structural, procedural and institutional aspects, IBBI said in a statement.

The report says the corporate insolvency resolution process (CIRP) in real estate should ordinarily be admitted project-wise, with each project treated as an independent economic unit. Admission may be confined to the defaulting project so that solvent or unrelated projects of the same developer continue under existing arrangements. It suggests the MCA consider enabling this, and that the DFS and RERA facilitate it through project-wise frameworks for lending, account maintenance and monitoring.

The committee recognised that real estate insolvency affects large numbers of homebuyers whose main expectation is delivery of homes and not financial recovery. IBBI said the committee’s view is that success should be measured not by procedural metrics but by homes delivered, trust restored and stalled economic value revived.

The panel was set up following the Supreme Court’s judgment of September 12, 2025 in Mansi Brar Fernandes v. Shubha Sharma & Ors., which directed IBBI, in consultation with Real Estate Regulatory Authorities (RERAs), to frame sector-specific guidelines, including timelines for project-wise CIRP and safeguards for allottees. IBBI said the committee consulted financial institutions, industry representatives, homebuyer associations, insolvency professionals, successful resolution applicants, domain experts and former adjudicating authority members, and analysed judicial pronouncements and empirical data.

The committee does not recommend "reverse CIRP", under which existing promoters complete the insolvent project, although this has been practised in a few cases under judicial orders. It favours project-wise resolution in which management passes to a professional RP and then to an appropriate RA.

On the "clean slate" principle, the report says regulations should state explicitly that the protection covers all real estate-specific liabilities, including property taxes, external development charges (EDC) and regulatory penalties accrued before plan approval. Penal interest and fines should be waived once a resolution plan is approved, and municipalities and development authorities may refrain from withholding future approvals (OC/CC) over pre-CIRP arrears settled under the plan.

It also recommends that, immediately on admission, the resolution professional appoint a reputable independent technical agency to audit the physical progress of construction tower-wise and unit-wise, estimate cost-to-complete at current market rates and check the status of statutory approvals.

Finally, the report says IBBI may specify that RERA should not freeze project-linked escrow accounts merely because the corporate debtor has been admitted under CIRP. These accounts must stay operational to receive homebuyer receivables and construction funds.