Committee Proposes 155 Measures for Real Estate Insolvency Guidelines

A high-powered committee tasked with reviewing insolvency guidelines for real estate projects has submitted a comprehensive report with 155 recommendations. These recommendations aim to enhance efficiency, ensure timely project completion, boost stakeholder confidence, and strengthen the alignment between insolvency processes and sectoral regulation.

The Committee on Framing Guidelines for Insolvency Proceedings in the Real Estate Sector, chaired by Jayanti Prasad, Whole Time Member of the Insolvency and Bankruptcy Board of India (IBBI), submitted its report on Wednesday. The report highlights the unique challenges posed by real estate insolvency, which directly impacts a large number of homebuyers. The primary expectation of these homebuyers is the completion and delivery of their homes, rather than financial recovery.

The committee's recommendations emphasize a shift from an entity-centric, recovery-focused framework to a project-centric, completion-driven approach. This approach requires stronger coordination between the IBBI and the Real Estate (Regulation and Development) Act, 2016. The IBBI constituted the committee last year following the Supreme Court's September 2025 ruling in the case of Mansi Brar Fernandes versus Shubha Sharma and others. The Supreme Court 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.

The committee examined 55 key issues affecting real estate insolvency and made 155 recommendations covering structural, procedural, and institutional aspects of the framework. The report notes that the real estate sector is one of the largest and most complex segments within the insolvency ecosystem. Since the inception of the Insolvency and Bankruptcy Code (IBC), hundreds of real estate cases have been admitted, with a significant number resolved through various means such as resolution, settlement, review, withdrawal, and liquidation. However, several cases remain ongoing.

Finance Minister Nirmala Sitharaman recently highlighted that of the 565 real estate cases admitted under the IBC, 111 cases involving 162,320 homebuyers have been resolved, while another 210 cases are still in process. The committee has recommended that corporate insolvency resolution in the real estate sector should be admitted on a project-wise basis, treating each real estate project as an independent unit for insolvency admission and resolution. This approach ensures that the unique needs of each project are addressed.

The committee also suggested that the adjudicating authority should order procedural consolidation of the assets required for the project's completion. This consolidation would treat the land-holding entity and the development entity as a single economic unit for the limited purpose of a resolution plan. Additionally, the committee recommended that upon admission of a case, the resolution professional should appoint a reputable, independent technical agency to conduct a comprehensive audit. This audit would determine the physical progress of construction, detailed Cost-to-Complete estimates based on current market rates, and the status of all statutory approvals.

Furthermore, the committee recommended that escrow accounts linked to real estate projects under the Corporate Insolvency Resolution Process (CIRP) should not be frozen by RERA just because the case has been admitted under CIRP. These escrow accounts are crucial for the continued operation and completion of real estate projects, ensuring that funds are available for necessary expenditures.

The proposed measures are designed to create a more robust and efficient insolvency framework for the real estate sector, ultimately benefiting homebuyers and other stakeholders. By focusing on project completion and stakeholder protection, the committee's recommendations aim to address the unique challenges of real estate insolvency and promote a more stable and transparent real estate market.