In a big relief for homebuyers, the Insolvency and Bankruptcy Board of India (IBBI) has allowed resolution professionals to hand over possession of plots, apartments, or buildings to homebuyers while insolvency proceedings are ongoing.
This amendment addresses a long-standing issue where homebuyers, despite having made payments, were left waiting indefinitely due to insolvency proceedings. By enabling possession transfer during the Corporate Insolvency Resolution Process (CIRP), the move shields buyers from prolonged financial and emotional distress. It also reassures potential homebuyers that stalled projects will not leave them in limbo, potentially boosting investment in the real estate sector.
Legal experts clarify that this does not mean the insolvency process is abandoned; rather, it enables parallel project completion while the resolution plan is being finalised. Traditionally, financial creditors dominated Committee of Creditors (CoC) decisions, but this change strengthens homebuyers’ (who are also counted as financial creditors in India) position as key stakeholders in real estate insolvencies.
Hari Hara Mishra, CEO of the Association of ARCs in India, described the amendment a major relief, stating that it would ensure faster resolution and improved communication with homebuyers.
Anjali Jain, Partner at Areness Law, highlighted how the reform would enhance real estate resolutions through improved coordination via facilitators and structured implementation via mandatory monitoring committees.
This is one of several IBBI amendments aimed at streamlining CIRP, particularly in real estate cases, marking a significant step toward rebuilding confidence in the insolvency resolution process.
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Appointment of Facilitators
Large creditor groups, such as homebuyers, often struggle with effective representation in the resolution process. To address this, the amendments permit the appointment of facilitators to improve communication between homebuyers, their authorised representatives, and the insolvency process. These facilitators will ensure that homebuyers receive timely updates, clarifications, and guidance, leading to more informed participation in decision-making.
Regulatory involvement
The CoC can now invite regulatory bodies such as NOIDA, HUDA, and other land authorities to participate in meetings and provide inputs on land-related matters. This is a crucial step towards ensuring that resolution plans comply with land development regulations, thereby improving the viability of projects and boosting confidence among homebuyers and other stakeholders.
Project viability
Resolution Professionals must now submit a detailed report on the status of development rights, approvals, and permissions within 60 days of the insolvency commencement. This will help creditors assess project viability, preventing situations where uninformed decision-making leads to failed resolutions.
Homebuyer empowerment
Homebuyers or their associations can now participate as resolution applicants with relaxed eligibility criteria, performance security requirements, and deposits. This amendment empowers homebuyers to take charge of stalled projects instead of relying solely on external bidders or developers.
MSME disclosure
The Resolution Professional is now required to disclose the corporate debtor’s registration status as a micro, small, or medium enterprise. This will encourage greater participation of potential resolution applicants as they can avail of benefits and relaxations available for MSMEs under the Code.
Mishra said “For MSME, the enhanced limits as defined in recent Budget, with disclosure of MSME status in IBC cases, will have more promoters eligible and opting for the per-packaged insolvency which has seen admission of only 13 cases so far”.