A committee of the Insolvency and Bankruptcy Board of India (IBBI) has recommended the need to shift from an entity-centric, recovery-focused framework to a project-centric, completion-driven approach, along with stronger coordination between the Insolvency and Bankruptcy Code (IBC) and the Real Estate (Regulation and Development) Act, 2016.
The committee’s report, released on April 8, said that it recommends that the corporate insolvency resolution process (CIRP) in the real estate sector “should ordinarily be admitted on a project-wise basis, with each real estate project treated as an independent economic unit for the purposes of insolvency admission and resolution”.
The Committee on Framing Guidelines for Insolvency Proceedings in the Real Estate Sector submitted its report to the chairperson, Insolvency and Bankruptcy Board of India (IBBI), Ravi Mital, on April 7, 2026.
“Admission may be confined to the defaulting project, allowing solvent or unrelated projects of the same developer to continue operating under existing arrangements. MCA may consider enabling project-wise admission of CIRP in the real estate insolvencies. The DFS and the RERA to consider facilitating project-wise admission by laying down project-wise frameworks for lending, maintenance of CD’s accounts project-wise, and project-wise monitoring,” the report said.
55 key issues affecting real estate insolvency examined and 155 recommendations made
The Committee has examined 55 key issues affecting real estate insolvency and has made 155 recommendations covering structural, procedural, and institutional aspects of the framework. These recommendations are aimed at improving efficiency, ensuring timely completion of projects, enhancing stakeholder confidence, and strengthening alignment between insolvency processes and sectoral regulation, IBBI said in a statement.
The Committee’s central conclusion is that “real estate insolvency requires a decisive shift from an entity-centric, recovery-oriented paradigm to a project-centric, completion-driven framework. The recommendations seek to harmonise insolvency law with real estate regulation, judicial guidance, and constitutional values, ensuring that the Code functions as an instrument of resolution rather than prolonged uncertainty. The ultimate measure of success, as the Committee emphasises, lies not in procedural metrics but in the delivery of homes, restoration of trust, and revival of stalled economic value,” IBBI said in a statement.
The report recognises that real estate insolvency presents unique challenges, as it directly affects large numbers of homebuyers whose primary expectation is completion and delivery of homes rather than financial recovery. It highlights the need for a shift from an entity-centric, recovery-focused framework to a project-centric, completion-driven approach, with stronger coordination between the IBC and the Real Estate (Regulation and Development) Act, 2016, it said.
The IBBI had constituted a Committee pursuant to the directions of the Supreme Court in its judgment dated September 12, 2025 in the matter of Mansi Brar Fernandes v. Shubha Sharma & Ors., wherein the SC directed the IBBI, in consultation with Real Estate Regulatory Authorities (RERAs), to frame sector-specific guidelines for real estate insolvency, including timelines for project-wise corporate insolvency resolution processes and safeguards for allottees.
“In discharging its mandate, the Committee adopted a consultative and evidence-based approach. It undertook extensive stakeholder consultations across financial institutions, industry representatives, homebuyer associations, insolvency professionals, successful resolution applicants, domain experts and former adjudicating authority members, and analysed judicial pronouncements, empirical data, and practical experiences from real estate insolvency cases,” IBBI said in a statement.
Committee does not recommend ‘reverse CIRP’
Further, the Committee does not recommend “reverse CIRP” at all (allowing existing promoters to complete the insolvent real-estate project) though the same has been practised in a few cases, under judicial orders.
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“Instead, the Code may allow for project-wise admission of CIRP or as per the framework recommended by this Committee, focus should be on project-wise resolution, where the management is transferred to a professional RP and then to an appropriate RA,” said the report.
Strict enforcement of the ‘clean slate’ principle
The regulations should explicitly state that the “clean slate” protection extends to all real estate-specific liabilities, including property taxes, external development charges (EDC), and regulatory penalties accrued prior to the plan approval. There should be a waiver of all penal interest and fines upon approval of the resolution plan. Municipalities and Development Authorities may refrain from withholding future approvals (OC/CC) on the grounds of pre-CIRP arrears that were settled under an approved resolution plan, the report said.
It has also been recommended that immediately upon admission of the case from the sector, the resolution professional should appoint a reputable, independent technical agency to conduct a comprehensive audit to determine the physical progress of construction (tower-wise/unit-wise), detailed Cost-to-Complete estimates based on current market rates and status of all statutory approvals.
RERA should not freeze escrow accounts linked to the real estate projects under CIRP
The IBBI may specify that escrow accounts linked to the real estate projects under CIRP should not be frozen by RERA just because the case has been admitted under CIRP, the report said.
“Mandatory operation of project-wise Escrow Accounts: The IBBI may specify that escrow accounts linked to the real estate projects under CIRP should not be frozen by RERA just because the CD has been admitted under CIRP. They must remain operational to receive homebuyer receivables and funds for construction,” the report said.
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