India's Insolvency Framework Set for Change as IBBI Prioritizes Homebuyers in Real Estate Cases

New Delhi, April 21: While buyers are legally recognized as financial creditors under the Insolvency and Bankruptcy Code (IBC), in practice, they still struggle to influence outcomes or recover their investments efficiently.

Key Recommendations

Project-Wise Insolvency Resolution

Instead of handling an entire developer's portfolio as one distressed entity, each project could be resolved independently. This would allow viable projects to move forward without being held back by unrelated financial issues, giving homebuyers a better chance of receiving their homes on time.

Streamlined Decision-Making

Since homebuyers often form a large and scattered group, their representation and voting power can become diluted. The proposed changes aim to make their participation more structured and effective, ensuring their concerns are not overlooked during resolution.

Clearer Rules and Better Coordination

The report emphasizes the need for clearer rules and better coordination between stakeholders—developers, lenders, and regulators—to reduce ambiguity and speed up the process.

Impact

Delays in insolvency cases not only impact buyers but also erode overall confidence in the real estate market. If implemented, these recommendations could significantly improve how stressed housing projects are handled in India. By putting homebuyers at the center, the reforms aim to restore trust, bring faster closures, and create a more balanced and practical insolvency system for the real estate sector.