Real Estate Bankruptcy Reforms Delayed as IBC Overhaul Advances

The government has decided to introduce corporate-focused Insolvency and Bankruptcy Code (IBC) amendments first, while pushing real estate bankruptcy reforms to a later phase. According to two people familiar with the matter, the real estate-focused reforms will undergo further consultation before being taken up separately.

The decision means that structural reforms aimed at protecting homebuyers and resolving stuck housing projects, a major stress point in India’s insolvency ecosystem, will have to wait longer. These measures were expected to address the delays and low recovery rates in realty bankruptcies.

The Ministry of Corporate Affairs is prioritizing insolvency law amendments that are already in an advanced stage. Real estate-focused reforms will undergo further expert and inter-ministerial consultations before being taken up separately. The IBC (Amendments) Bill, 2025, currently under review by a Lok Sabha select committee headed by BJP MP Baijayant Panda, proposes a creditor-led, largely out-of-court insolvency process for quicker corporate turnaround, faster tribunal admissions, a new framework for group and cross-border bankruptcies, and separate provisions to resolve implementation disputes.

The Bill also proposes a tighter definition of secured debt to exclude statutory dues that are not backed by an agreement and are created by mere operation of law. Considerable deliberations have already taken place within the government on the proposed changes, and the Bill will not be held back to include real estate measures.

Chances of the revised IBC (Amendments) Bill making it to either the Winter Session or the budget session are fifty-fifty, one of the officials said. Although the Bill is part of the winter legislative agenda, the committee’s review is still underway. It is scheduled to consult real estate regulatory authorities on December 5 and may receive more time to finalize its report, originally due by the first day of the Winter Session. The government is expected to modify the Bill based on these recommendations.

Reforms being weighed separately include project-specific insolvency, safeguards for homebuyers, enabling the SWAMIH fund to complete projects under IBC, and early project registration with local authorities. These deliberations involve the Corporate Affairs Ministry, Housing Ministry, and the Insolvency and Bankruptcy Board of India (IBBI). The proposals stem from the Supreme Court’s September 12 directions in the Mansi Brar Fernandes vs. Shubha Sharma case and remain at a preliminary stage. Two committees—one being set up by the government and another under IBBI—will finalize them before a later round of IBC amendments.

Experts say the bankruptcy code has already significantly strengthened the distressed-asset ecosystem. “India’s distressed-asset market has become significantly more investor-friendly in recent years. A more mature IBC framework, greater participation from asset reconstruction companies and alternative investment funds, and enhanced transparency in resolution processes have collectively strengthened confidence,” said Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm.

“IBC itself has evolved considerably with streamlined admission norms, stronger creditor rights, and clearer claim rankings, smoother approval of resolution plans, and consistent respect for the commercial wisdom of the Committee of Creditors (CoC). Today, investors have a far better visibility of timelines, rights, and recovery pathways than in the Code’s early years,” added Maheshwari.

The roll-out of a simplified pre-packaged insolvency framework for MSMEs in 2020 has further paved the way for quicker revival of smaller stressed businesses. “In real estate, these reforms reduce execution risk, preserve value, and enable structured acquisitions which make investing in distressed assets more feasible for long-term capital,” Maheshwari said.

Measures such as strict enforcement of debt resolution timelines, expansion of NCLT capacity, dedicated sector-specific resolution schemes, and a cross-border framework will make the IBC regime more refined, said experts. Queries emailed to the Ministry of Corporate Affairs, Ministry of Housing and Urban Affairs, and IBBI remained unanswered.