In the Insolvency and Bankruptcy Board of India’s (IBBI) April report on insolvency proceedings in the real estate sector, homebuyers were the highlight. The report highlights that ongoing and resolved insolvency cases together affect nearly a quarter of a million homebuyers, translating into housing insecurity for close to a million individuals when household size is considered.
According to the report, the cumulative impact of the 553 admitted real estate cases extends across a homebuyer population of approximately 2,49,087 individuals, collectively representing substantial financial investments and housing aspirations.
This total comprises approximately 1,40,200 homebuyers in the 95 resolved cases and approximately 1,08,887 homebuyers in the 221 ongoing cases. These numbers represent families paying EMIs on homes they cannot move into, often simultaneously paying rent for alternate accommodation.
The committee, in its report, analysed sector specific challenges in real estate insolvency especially affecting homebuyers, resolution applicants, regulators and creditors and recommended measures to strengthen the effective implementation of the Insolvency and Bankruptcy Code, 2016 (IBC).
Genuine v speculative homebuyers
The Committee, in the report, recommended that, upon admitting a real estate corporate debtor’s application, the Adjudicating Authority may, if necessary, assess the transaction’s nature to distinguish genuine from speculative applicants.The groundwork for this distinction was laid by the Supreme Court’s September 2025 ruling in Mansi Brar Fernandes v. Shubha Sharma (2025), which held that speculative investors cannot misuse the IBC to trigger Corporate Insolvency Resolution Process (CIRP) as a recovery mechanism. The Court laid down six indicative factors including possession intent, funding source and unit count to guide adjudicating authorities.
Raheel Patel, partner at Gandhi Law Associates, calls the distinction “unworkable in practice.” “Intent is subjective, easily gamed, and will be used by developers to dilute voting rights and delay payouts—defeating the 2018 framework where all homebuyer funds are treated as financial debt,” he says.
“The application and adjudication of such a classification of homebuyers may create interpretational challenges for the Adjudicating Authority, however, no claim for initiating the CIRP should be dismissed,” said Chirag Gupta, associate partner, Alpha Partners. “While a transaction involving a speculative investor may not be at the same footing as that of a homebuyer, it can still be argued to constitute a financial debt as the debt is disbursed against the time value of money.”
“The challenge is that intent is inherently subjective — an investor holding two units can claim end-use, while a genuine buyer in a commercial city may have purchased for rental income,” said Suhael Buttan, partner, SKV Law Offices. “Developers could strategically exploit this ambiguity by flagging bulk purchasers as “speculative” to dilute CoC voting blocs or delay payouts, particularly where homebuyer votes could tip the balance against a preferred resolution plan.”
Abhishek Mukherjee, partner at Cyril Amarchand Mangaldas, believes that the Court’s six-pointer framework will “act as a deterrent for exploitation of homebuyers’ interests by unscrupulous developers and investors,” even if identifying speculative transactions remains “slightly tricky.”
Specialised NCLT Bench
The gap between Committee of Creditors (CoC) approval of resolution plans and final National Company Law Tribunal (NCLT) sign-off can stretch for months or even years, eroding project viability by freezing construction funding, deterring resolution applicants and leaving homebuyers in prolonged uncertainty.
The committee recommended creating specialised or dedicated benches for real estate matters within the NCLT, alongside strict adherence to timelines introduced through recent IBC amendments.
Apoorva Bhadang, partner at Vesta Legal said, “The Committee’s recommendation for specialised or dedicated benches can be effectively implemented with the appointment of additional members, adequate infrastructure facilities, and a robust case management system.”
She cautions, however, against a blanket prioritisation of real estate cases over all other insolvency matters. Instead, she said “criteria-based prioritisation—such as cases where projects are near completion or where a resolution plan has already been approved by the CoC.”
Alay Razvi, Managing Partner at Accord Juris, notes that specialised NCLT benches, particularly in high-volume jurisdictions like Mumbai and Delhi, align with Supreme Court directives in Mansi Brar for time-bound disposal. He suggests 60-day approval timelines and e-filings to ensure procedural equity across cases.
Buttan, however, noted, “Creating dedicated benches would require new appointments or reallocation, both mired in systemic delays. Dedicated cause lists and time-bound hearing schedules are a more realistic interim fix.”
Project-wise CIRP Admission
As per the IBBI‘s Newsletter for the quarter ended December 31, 2025, real estate & construction accounted for 16 percent of all 8,833 CIRPs admitted till date, the second-largest sector after manufacturing and 17 percent of the 1,376 CIRPs yielding approved resolution plans.
Financial creditors triggered 47.67 percent of total CIRPs, often in larger real estate defaults exceeding INR 10 crore, with resolved cases delivering 171.54 percent of liquidation value on average (INR 4.11 lakh crore realised against INR 2.40 lakh crore liquidation value), though haircuts averaged 69 percent relative to admitted claims.
Under the current framework, a default in one project pulls the entire developer and all its other projects, including viable and near-completion ones, into insolvency. The committee’s recommendation to ring-fence projects at the admission stage aligns with the project-centric architecture of RERA and with the Supreme Court’s direction in Mansi Brar that “real estate insolvency should, as a rule, proceed on a project-specific basis”.
Bhadang said, “The fundamental object of IBC is resolution and revival, not recovery. Following the RERA framework, where each project has its own disclosures, escrow requirements, and compliance obligations, a project-wise approach to CIRP aligns better with how the sector already functions.”
Mukherjee points to the “interconnectedness of projects at a broader level—joint finances, shared approvals, and interlinked land titles”—as the key friction point, and calls for a “coordinated approach amongst all stakeholders at both project and company levels.”
Gupta warns that project-wise insolvency may “increase litigation costs and delay completion of viable projects due to multiplicity of proceedings,” calling for a “comprehensive legal framework providing adequate safeguards to avoid such issues.”
Patel says “Project-wise CIRP is messy due to interlinked assets, but still preferable to entity-level insolvency that drags viable projects into collapse.”
Authorised Representatives – ‘Passive Intermediaries’
The report termed Authorised Representatives (ARs) as passive intermediaries. The NCLAT’s 2023 ruling in Rajib Biswas v. Arena Superstructures had already held that ARs are not “mere post-boxes” but fiduciaries. The IBBI report goes further, recommending mandatory pre-vote town halls, plain-language plan summaries, and structured engagement mechanisms backed by penalties.
The problem is that the current framework provides no enforceable accountability mechanism for ARs.
The Committee recommends enhancing AR selection for homebuyer classes by providing profiles and role notes; enforcing independence via disclosures of relationships with CD/FCs/PRAs; mandating initial notes, periodic CIRP updates, and reasoned voting summaries alongside CoC consultations; requiring submission of class meeting records to IRP/RP for CoC minutes; maintaining audit trails of communications; and treating material non-compliance as a professional lapse warranting regulatory action based on prejudice to homebuyers.
As Mukherjee notes, “unlike Resolution Professionals, the current framework does not provide for any strict accountability mechanisms for ARs. Mandatory pre-vote town halls, as the Report recommends, are necessary but insufficient without enforceable accountability.”
Gupta recommends, “A mandatory obligation for conducting a meeting to explain resolution plans, and documenting minutes of each meeting held between the AR and the CoC in a CIRP concerning real estate projects, backed by appropriate penalties for non-compliance.”
“ARs serve as passive intermediaries under IBBI (CIRP) Reg. 16A, merely circulating agendas without proactive engagement, causing uninformed homebuyer voting,” said Razvi. “Oversight via RP and IBBI complaints exists; report pushes consultations, plain-language summaries, voting guidance. Licensing like RPs—with IBBI certification, real estate training, audits—ensures fiduciary duties, independence, and outreach, bolstering creditor democracy.”
Patel disagrees with licensing as the primary lever, arguing “accountability and disclosure” matter more.
Whether the legislative and institutional machinery can translate the 155 recommendations, suggested in the report, into lived outcomes for Indian homebuyers remains to be tested. As the report states, “the ultimate measure of success lies not in procedural metrics but in the delivery of homes, restoration of trust, and revival of stalled economic value.”
