India to Set Up Govt Panel to Revive Stalled Real Estate Projects

The Ministry of Corporate Affairs has initiated discussions with other ministries and regulatory bodies to accelerate the completion of stalled real estate projects, revive insolvent developers, and enhance debt resolution efficiency. According to two sources familiar with the development, the ministry is in the process of forming a committee comprising members from various ministries and regulatory agencies. This committee will focus on developing a blueprint of ‘commercially viable systemic reforms’ to address the distress in the real estate sector.

The primary goal is to restore public confidence in the real estate market. As of two years ago, investments of over ₹4 trillion were stuck, covering 4.12 lakh stressed dwelling units in the country, as reported by an expert committee led by India’s former G20 Sherpa, Amitabh Kant, in July 2023. These figures are expected to have grown since then, with more than half of the 4.12 lakh units—approximately 2.40 lakh apartments or houses—located in the National Capital Region.

The committee being set up by the Ministry of Corporate Affairs is distinct from a panel recently established by the Insolvency and Bankruptcy Board of India (IBBI) to explore project-wise bankruptcy resolution for real estate projects, as opposed to the current practice of company-level resolution. The new committee will include members from the Ministries of Law and Housing and Urban Affairs, the National Institute of Urban Affairs, IBBI, and the Department of Financial Services, among other experts.

“The committee will submit its recommendations within six months. Formalities for setting up the committee are underway, and a preliminary meeting of officials from different ministries has already taken place last week to discuss the distress in the real estate sector,” said one of the sources, who spoke on condition of anonymity. The committee is expected to be formalized soon.

The committee will also examine the possibility of including real estate projects undergoing bankruptcy proceedings within the scope of an existing scheme introduced in 2019 for completing affordable home projects that are stuck. This could be achieved by broadening the scope of the Special Window for Affordable and Mid-Income Housing (Swamih) Fund, aimed at benefiting home buyers struggling with the dual burden of mortgage payments and rent.

In the FY26 budget, Union Finance and Corporate Affairs Minister Nirmala Sitharaman announced a new version of the scheme with ₹15,000 crore in funding to complete an additional 100,000 homes. This is in addition to the 50,000 homes already completed under the scheme and another 40,000 expected to be completed this calendar year.

The real estate and construction sectors together account for a third of the 8,500 bankruptcy cases admitted to the National Company Law Tribunal (NCLT) since 2016 under the Insolvency and Bankruptcy Code (IBC). Of the 1,258 insolvency cases across sectors where resolution plans have been approved so far, real estate companies comprise 17%, according to data from IBBI.

The other proposals the panel will examine include strengthening the judicial capacity and infrastructure of tribunals, setting up dedicated NCLT benches for insolvency resolution, project-wise insolvency resolution, and early registration of real estate projects with local revenue authorities to protect home buyers.

Better coordination between IBC proceedings and the Real Estate (Regulatory and Development) Act (Rera Act) for stress resolution and progress on ongoing projects, coupled with targeted concessions for stalled projects, will improve the outcome of insolvency resolution, said Ashok Haldia, who chaired an expert group of the Indian Institute of Insolvency Professionals of ICAI on real estate debt resolution.

“In respect of stalled projects, where resolution plans are not forthcoming, special concessions, such as additional floor area ratio/floor space index, could be given to generate additional funds to complete the projects,” said Haldia, adding that project-wise resolution of housing projects should be enabled.

He also noted that lenders should not claim superiority over homebuyers simply because of the security cover they hold. They should be accountable for due diligence and monitoring, and homebuyers should be granted a moratorium for loan repayment. “For this reason, the homebuyers should also get a moratorium for repayment of loans borrowed from these banks,” said Haldia, who previously served as secretary at ICAI, the regulatory body for chartered accountants in India.

However, homebuyers affected by stalled projects are not very enthused about the idea of project-wise insolvency resolution.

“If a company is not able to make money out of one project and it becomes unviable, then it makes a good case for using revenue from profitable projects on stalled ones. Bringing in project-specific insolvency proceedings may not help distressed homebuyers and could be a way for developers to avoid using their revenue from viable projects to complete unviable ones,” said Abhay Upadhyay, president of the Forum for People's Collective Efforts, a homebuyers association.

Project-wise debt resolution is under consideration to protect the interests of home buyers in healthy projects from the financial stress of stalled projects. Upadhyay, who is also a member of the Central Advisory Council of RERA, said that the idea of using the Swamih fund for IBC cases may not be effective as the fund was set up to provide last-mile funding to projects that are otherwise financially viable, while projects and developers undergoing insolvency resolution are not solvent and, therefore, not viable.

“Allowing projects and developers undergoing corporate insolvency resolution access to the Swamih fund would change the basic character of the fund,” he said.

Haldia suggested that state development and licensing bodies, such as the Delhi Development Authority and the New Okhla Industrial Development Authority, should not cancel leases or approvals during resolution proceedings and should instead file claims like other creditors.

The Ministry of Corporate Affairs is exploring these real estate insolvency reforms on the direction of the Supreme Court in a recent case related to home buyers: Mansi Brar Fernandes Vs. Shubha Sharma and others. Queries emailed to the Ministries of Corporate Affairs, Law, Housing and Urban Affairs, and IBBI on November 6, seeking comments for the story, remained unanswered at the time of publishing.