• Regulators
• 3 min read

Real estate insolvency overhaul: Here's what the IBBI panel has recommended

A Supreme Court-directed committee has proposed significant changes to real estate insolvency rules. The focus is shifting from liquidation to completing projects and preserving value. Key recommendations include project-wise insolvency, ensuring project continuity, and improving transparency. These measures aim to attract credible bidders and boost market participation for better outcomes.

• ETCFO

• Published On Apr 15, 2026 at 05:30 PM IST

A committee set up by the Insolvency and Bankruptcy Board of India (IBBI), following directions from the Supreme Court of India in the Mansi Brar Fernandes vs Shubha Sharma case, has proposed a wide-ranging overhaul of the insolvency framework for the real estate sector. The central theme across its 155 recommendations is a clear shift in approach—moving away from liquidation-led recovery towards project completion and value preservation, recognising that real estate value is realised only when projects are delivered.

Key changes proposed in Real Estate Insovency Framework:

Project-wise insolvency: A structural reset

Advt The committee has suggested that corporate insolvency resolution should ordinarily be confined to the specific project where the default has occurred, rather than pulling the entire developer into proceedings. This would ensure that solvent, completed, or unrelated projects are ring-fenced from the stress of a single default.

Entity-level insolvency has not been ruled out entirely, but has been limited to exceptional cases such as fund commingling, cross-collateralisation, or fraud. Even in such situations, the adjudicating authority would be required to record reasons for deviating from the project-wise approach.

Project continuity during insolvency

A key concern in real estate insolvency has been the stalling of projects due to legal and operational bottlenecks. To address this, the panel has proposed procedural consolidation where land ownership and development rights are held by separate group entities, allowing them to be treated as a single economic unit for resolution purposes.

The committee has also recommended that project-wise escrow accounts should remain operational during insolvency instead of being frozen. These accounts would continue to receive homebuyer payments and fund construction, with strict safeguards ensuring that withdrawals are used only for that specific project and certified by professionals.

Advt In addition, the panel has proposed automatic extension of licences and approvals during the insolvency period, along with a fast-track revalidation mechanism through a dedicated “insolvency clearance window.”

Improving transparency and data integrity

The IBBI committee has proposed that an independent technical assessment be conducted immediately upon admission to determine the actual status of construction, cost-to-complete, and pending approvals. This report would form a critical part of the information memorandum shared with potential resolution applicants.

It has also called for stronger integration of data across RERA, banks, and information utilities to ensure accurate identification of creditors, particularly homebuyers. By making disclosures more comprehensive and reliable, akin to a prospectus-level document, the framework aims to attract more credible bidders and improve the efficiency of the resolution process.

Financial clarity and the ‘clean slate’ principle

On the financial side, the committee has sought to reduce uncertainty by reinforcing the “clean slate” principle. It has recommended that once a resolution plan is approved, all past liabilities, including statutory dues and penalties, should be treated as settled, preventing authorities from raising fresh claims post-approval.

The panel has also suggested standardising the treatment of land dues in insolvency, including waivers of penal interest and restructuring of payments.

Boosting execution and market participation

To improve outcomes, the committee has proposed measures to enhance participation and execution capacity in real estate insolvency. These include encouraging homebuyer-led resolution plans, involving public sector entities such as NBCC and HUDCO in project completion, and integrating last-mile funding mechanisms like the SWAMIH Fund into the resolution process.

It has also recommended setting up specialised benches in the NCLT for real estate cases to ensure faster and more informed decision-making. At the same time, it has suggested moving away from ad hoc mechanisms like reverse CIRP in favour of a more structured, code-compliant framework.