IBBI Committee Proposes Project-Wise Insolvency for Real Estate Cases
A committee of the Insolvency and Bankruptcy Board of India (IBBI) has recommended that the resolution process for stressed assets of real estate companies be conducted on a project-wise basis. This approach contrasts with the current practice of pulling the entire company into insolvency.
The committee’s report, released on April 8, states that corporate insolvency resolution process (CIRP) in the real estate sector should be admitted on a project-wise basis, with each real estate project treated as an independent unit for the purposes of insolvency admission and resolution.
The Supreme Court, in its Mansi Brar judgement on September 12, 2025, directed the IBBI to frame specific guidelines to ensure real estate insolvency cases are examined on a project-specific base as a 'matter of rule.'
Project-wise insolvency framework has been a key ask of the industry, which is currently not explicitly mentioned in the Insolvency and Bankruptcy Code. However, IBBI guidelines do permit resolution professionals to invite separate resolution plans for specific projects or assets of a company. A lack of clear statutory guidelines leaves room for project-wise insolvency to be challenged in courts due to non-alignment of the law and regulations.
The report recommends that admission of CIRP may be confined to the defaulting project, and 'solvent, completed, or unrelated projects of the same developer may not be included.'
Given the peculiar challenges in the insolvency resolution of real estate cases, the Ministry of Corporate Affairs (MCA) and IBBI may consider enabling project-wise admission of CIRP of real estate cases. The Department of Financial Services (DFS) and RERA may consider facilitating project-wise admission by laying down project-wise frameworks such as project-wise lending, maintenance of CDs’ accounts project-wise, and project-wise monitoring.
The committee also states that 'entity-level (the Corporate Debtor) CIRP encompassing multiple projects may be permitted only in exceptional circumstances, including: substantial inter-linkages or commingling of funds across projects; cross-collateralisation of assets or guarantees; or demonstrable fraud or mismanagement affecting multiple projects.'
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 practiced in a few cases, under judicial orders. 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.
Additionally, 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.
