These homebuyers can gain from new insolvency rule

A recent amendment to India's insolvency rules aims to help homebuyers trapped in projects where the builder has become insolvent. This change, announced on October 30, 2026 by the Insolvency and Bankruptcy Board of India (IBBI), states that a viable project developed by an insolvent builder will no longer be included in the insolvency proceedings.

For instance, if a builder has three projects (A, B and C) with varying stages of completion, only projects B and C would be included in insolvency proceedings, while project A, which is 95% complete and meets all necessary approvals, would be excluded if it proves financially viable.

The amendment mandates that the insolvency resolution professional (IRP) informs the committee of creditors (CoC) about the projects of the insolvent builder during the first meeting. The IRP must also update the CoC on the construction progress, including the projects' RERA registration, possession status and other relevant information. The CoC, with a 66% vote and final approval from the National Company Law Tribunal (NCLT), can then decide to exclude specific projects from insolvency proceedings.

This amendment primarily benefits homebuyers whose units are near completion in a stalled project developed by a builder with multiple ongoing projects. Under this new rule, the CoC can recommend to the NCLT to exclude such near-completed projects from insolvency proceedings. The resolution professional can also process homebuyer requests for handover of possession and registration without needing fresh approval for each case.

Moreover, the resolution plan for the real estate project must include project-wise details, such as treatment of claims of allottees, including registration, execution of conveyance deed, refund and time lines for completion and delivery of possession.

These changes recognize project-wise monitoring, implementation and resolution in real estate companies. The CoC can approve the exclusion of near-completed projects from the compulsory insolvency resolution process (CIRP) and allow the resolution professional to complete the registration of units for homebuyers who have fully discharged their obligations.

This allows for quicker access to units for homebuyers who have made all payments, expediting final hand-over and possession while keeping it outside the procedural complexities of CIRP and a new counterparty (RERA).

If a homebuyer has booked a flat in a project that stalls and the developer becomes insolvent, the amendment ensures that the funds collected must remain in a separate project bank account and be used in line with the Real Estate Regulation and Amendment (RERA) Act. The IRP must obtain an independent assessment of the project's construction and cost, which it shares with the bidders.

The CoC can also allow the resolution professional to proceed with the possession and registration of a unit upon the request of the relevant homebuyer.

The resolution plan for the real estate project must now provide details on how homebuyers' claims will be handled, such as possession, conveyance, refund, or other relief, and must fix project, phase or tower-wise timelines for completion and delivery. Although the amendment does not change the basis for filing a claim with an allotment letter, it states that the information memorandum must disclose, project-wise, how many allottees seek possession, refund, execution of conveyance deed, registration or any other relief.

Additionally, every resolution plan must outline the treatment for allottees present in the developer's books or RERA records but who have not filed a claim.