Strengthening Homebuyers' Rights: Recent Reforms in Real Estate CIRP
The Indian Real Estate sector has experienced unprecedented growth over the past two decades, but it has also exposed deep structural vulnerabilities, particularly when developers default. Recent reforms under the IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025, aim to strengthen the position of homebuyers in corporate insolvency proceedings.
Real EstateInsolvencyHomebuyersIbbiCirpReal EstateSep 05, 2025
These reforms are based on a series of Supreme Court judgments that acknowledged the hardships faced by homebuyers. In Chitra Sharma v. Union of India, the Court noted that homebuyers were remediless under the existing insolvency regime and that there was a need for provisions to involve them in resolution proceedings. This was further crystallized in Pioneer Urban Land & Infrastructure Ltd. v. Union of India, where the Court upheld the 2018 amendment that classified allottees as financial creditors, allowing them the right of action under Sections 7 and 21 of the IBC. However, even with this legal equivalence, the real attitude towards homebuyers was unequal and did not always involve them in possession, decision-making, and transparency.
The 2025 regulations now aim to bridge this practical gap. Perhaps the most transformative provision is the one allowing the resolution professional to hand over possession of completed units to allottees during the corporate insolvency resolution process, even during the moratorium under Section 14 of the Code. Until now, courts had to intervene on a case-by-case basis. For example, in Alok Sharma v. I.P. Constructions Pvt. Ltd., the NCLAT permitted the execution of sale deeds during the moratorium where possession had already been granted. Similarly, in NOIDA v. Lotus 300 Apartment Owners Association, the Supreme Court allowed the continuation of registration of sale deeds to avoid consumer injustice. The 2025 amendment codifies this principle into regulation, authorizing the RP to hand over possession upon fulfillment of certain conditions, full payment by the allottee, approval by the Committee of Creditors with a minimum of sixty-six percent voting share, and a written request from the allottee. This is a deeply progressive move that reflects a transition from adversarial approaches in litigation to process-oriented resolutions that advance accountability in contractual fairness.
The reforms also address another major issue in real estate insolvency: the absence of involvement of land-owning or statutory development authorities. In some prominent instances, such as the Jaypee Infratech insolvency, the lack of or unwillingness of public authorities to act as part of the resolution process resulted in delays or failures in the implementation of the plan. The latest framework makes it compulsory for meetings of the Committee of Creditors to be opened up to participation by competent statutory authorities, including development authorities, municipal corporations, and RERA. Their inclusion, though not as voting participants, ensures that key approvals like occupancy certificates and land use permissions are part of the resolution plans from the start.
Moreover, the presence of RERA in CoC meetings is supposed to provide technical scrutiny into ongoing construction and ensure that the welfare of consumers comes first. This aligns with Section 25A of the IBC, which regulates the entitlement of any authorized representative of a financial creditor who is a member of a class. In a harmonious interpretation with the Real Estate (Regulation and Development) Act, 2016, it becomes emphatic about involving homebuyers in decision-making processes through institutional channels.
Another crucial reform lies in the recognition of homebuyer associations as resolution applicants. Critical terms in the submission of resolution plans up to the recent past included performance security and earnest security deposits, which effectively locked out allottees from proposing plans on their own projects. The February 2025 revision proposes a graded easing. Any associations of creditors representing at least ten percent by value or one hundred allottees (whichever is lower) can now submit resolution plans to be approved by the CoC. The performance security requirement can be waived by the Committee once the proposal is found viable. This promotes group action among homebuyers, particularly in scenarios where no other bidders are willing to show interest in a pending project.
To support the large group of homebuyers, the amended framework proposes the concept of facilitators. Where the number of creditors within a given class exceeds a thousand, facilitators of up to five per class may be appointed to assist the authorized representative in reaching out to the population and building a consensus. This tackles one of the central implementation dilemmas that have beset previous initiatives: the overwhelming size and diversity of the homebuyer population. The agents are regulated insolvency practitioners, and their fee is limited to twenty percent of the fee of the authorized representative, ensuring affordability.
Access to information and transparency have also been enhanced. Resolution professionals must now prepare a detailed project status report within sixty days of the insolvency start. This report includes important details like the status of land title, approvals secured, any pending litigation, and construction progress. In earlier cases, like Manish Kumar v. Union of India, the Supreme Court observed that homebuyers had trouble engaging in meaningful participation due to information asymmetry. This new requirement aims to ensure that homebuyers and creditors have full information to make important decisions about resolution plans. In addition to the provisions of IBBI, state RERA bodies have continued to supplement these reforms. For example, the recent change in the Maharashtra RERA registration certificate format aims to increase transparency by requiring information on built-up area, number of units, and other construction priority dates through the use of QR codes. Similarly, Odisha RERA has constituted a Conciliation and Dispute Resolution Cell to facilitate dispute resolution between promoters and allottees, which may prevent further developments of disputes to insolvency.
Collectively, these multi-layered reforms represent a shift from reactive litigation to proactive resolution. They refine the position of homebuyers not merely as financial creditors who have a right to vote but as rightful stakeholders in the future of the project they have invested in. They also represent a level of regulatory maturity that considers real estate insolvency as distinct from standard corporate insolvency, both in the nature of the assets involved and in the constitutional and consumer rights ramifications it presents. As our nation continues to fine-tune its insolvency architecture, the 2025 IBBI reforms stand out for their calibration of economic and equitable concerns. They ensure that the future of real estate projects is no longer decided in closed rooms but through collaboration with those who will someday live in the spaces these projects offer. The journey is not over yet, but the path is certainly clearer.
Frequently Asked Questions
What is the main goal of the recent reforms in the Insolvency and Bankruptcy Code (IBC)?
The main goal of the recent reforms is to strengthen the position of homebuyers in corporate insolvency proceedings, ensuring they are not sidelined and have better rights and protections.
What is the significance of the 2025 IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations?
The 2025 regulations are significant because they codify the right of resolution professionals to hand over possession of completed units to allottees during the insolvency process, even during the moratorium.
How do the reforms address the involvement of statutory development authorities in the insolvency process?
The reforms make it compulsory for meetings of the Committee of Creditors to include participation by competent statutory authorities, including development authorities and RERA, to ensure key approvals are part of the resolution plans from the start.
What new role do homebuyer associations play under the recent reforms?
Homebuyer associations can now submit resolution plans to be approved by the Committee of Creditors, provided they represent at least ten percent by value or one hundred allottees (whichever is lower).
How do the reforms enhance transparency and access to information for homebuyers?
Resolution professionals must prepare a detailed project status report within sixty days of the insolvency start, including important details like land title status, approvals, and construction progress, to ensure homebuyers and creditors have full information.
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