These homebuyers can gain from new insolvency rule

Synopsis The Insolvency and Bankruptcy Board of India (IBBI) amended the insolvency rules with the aim of giving relief to specified homebuyers who are stuck in projects where the builder has gone insolvent. This amendment says that now, if there is a viable project built by a builder who is under the insolvency process, then this viable project won’t be included in the insolvency process if it gets the majority votes. Listen to this article in summarized format Listen ET Online A few weeks ago, the Insolvency and Bankruptcy Board of India ( IBBI ) amended the insolvency rules to help homebuyers trapped in projects where the builder has become insolvent. This amendment was announced by IBBI on October 30, 2026, and it says that a viable project developed by a builder undergoing insolvency process will no longer be included in the insolvency proceedings . For example: Suppose there are three real estate projects (A, B, C) being built by a builder who is undergoing a corporate insolvency process. Project A is 95% complete, B is 50% complete, and C is 10% complete. Before this amendment, all the projects (A, B, C) would get tied up in the insolvency proceedings ; now only B and C would be included. Project A would be excluded if it is financially viable and has the necessary approvals. Read on to learn what the amendments include and how they can help homebuyers. What is the meaning of this amendment? This amendment says that the insolvency resolution professional will give the details of the projects undertaken by the insolvent builder to the committee of creditors in the first meeting itself. The insolvency resolution professional will also update the committee of creditors on the progress of construction of the respective projects, including its RERA registration, possession status and other relevant information. Acting on this information, the committee of creditors can decide to exclude specific projects from insolvency proceedings if the decision receives 66% of votes and final approval from the National Company Law Tribunal (NCLT). Previously, all projects were tied together for the insolvency process. As a result, homebuyers whose units were nearly complete, also faced the same delay and uncertainty as those whose units were still unfinished. Siddharth Srivastava, Partner at Khaitan & Co, says that for near-complete stalled projects, the following changes introduced by the regulations matter most: where a developer has more than one project, the Committee of Creditors (CoC) may, by at least 66% vote, recommend to the NCLT that a project be excluded from the insolvency process; the CoC with a 66% vote may grant an in-principle approval allowing the resolution professional to process all homebuyer requests for handover of possession and registration during the insolvency process, without fresh approval each time; the resolution plan for a real estate project to provide project- wise details, including treatment of claims of allottees by way of registration, execution of conveyance deed, refund and time line of completion and delivery of possession; and monitoring committee to include authorised representatives of homebuyers and representatives of the concerned real estate authority, subject to their agreement Which homebuyers would benefit from this new amendment? Srivastava says that primarily those homebuyers would benefit who are stuck in projects that are completed, occupied or close to completion, of a builder with multiple ongoing projects who is facing insolvency. Srivastava says: “Such projects can be considered for exclusion from the insolvency process, and the buyers can obtain possession and registration faster.” Soumitra Majumdar, Partner, JSA Advocates & Solicitors, says these amendments expressly recognise project-wise monitoring, implementation and resolution in real estate companies. These amendments enable the COC to approve exclusion of near-completed projects from the CIRP process along with permission to the RP to complete registration of units to home buyers who have fully discharged their obligations. Majumdar says: “These allow quick access to the units for the home-buyers who have made all payments. Homebuyers who have fully paid up and have their units ready. The final hand-over and possession can now be expedited, and kept outside the procedural vagaries of CIRP and a new counterparty (being the RA).” If a homebuyer has booked a flat, but the project stalls and the developer becomes , how does the amendment protect the buyer? Srivastava says that under the recently introduced regulations, funds collected for the project must sit in a separate project bank account and be used in line with RERA. An independent technical and cost-to-complete assessment of the project must be obtained by the resolution professional and shared with the bidders. The CoC is also empowered to allow the resolution professional to proceed with the possession and registration of a unit at the request of the relevant homebuyer. According to Srivastava, the resolution plan for a real estate project must now provide how homebuyers' claims will be dealt with (possession, conveyance, refund or otherwise) and fix project, phase or tower-wise timelines for completion and delivery. Srivastava says: “Homebuyers' representatives, RERA and the competent authority (subject to their agreement) are now to sit on the monitoring committee overseeing implementation of the plan.” Does the amendment help homebuyers who only have an allotment letter and not agreement to sell ? The amendment does not change the basis on which a homebuyer files a claim with an allotment letter always being considered valid for claim verification. However, Srivastava says the ame ndment states that the information memorandum must disclose, project-wise, how many allottees seek possession of units, refund of amount, execution of conveyance deed, registration or any other relief sought under the claim form. Srivastava also says that this amendment mandates that allottees who are present in the developer's books or RERA records but who have not filed a claim, must also be listed in the information memorandum, and every resolution plan must provide for their treatment. What happens if the project is nearly complete but the developer has outstanding loans or liabilities linked to it? Majumdar says that practically the construction finance lender would have released sold units from its mortgage and such amounts should have been used to pare down the construction finance loan. Various solutions can be worked out in these circumstances for the benefit of the construction finance lender and the homebuyer. Majumdar says: “Release of a project will have to be done without prejudice to the outstanding claims and security value.” (Join our ETWealth WhatsApp channel for all the latest updates) Add as a Reliable and Trusted News Source Add Now! 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