IBBI issues discussion paper on strengthening resolution outcomes in real estate insolvency: project-wise resolution, homebuyer protection and enhanced regulatory oversight

Key Highlights of the Discussion Paper: 

1. Project-Wise Identification and Exclusion from CIRP: Recognising that a developer may have multiple projects at different stages of completion, IBBI has proposed a mechanism enabling the Committee of Creditors (CoC) to identify completed, occupied or substantially completed projects that may not require insolvency intervention. Where approved by sixty-six per cent of the voting share, the resolution professional (RP) may seek exclusion of such projects from the scope of CIRP through an application before the Adjudicating Authority. This proposal seeks to minimise disruption to projects that are substantially independent from the insolvency process.

2. Strengthening Project-Wise Ring-Fencing of Funds: The discussion paper proposes mandatory maintenance of separate books of account and dedicated bank accounts for each real estate project. All project-specific receipts and payments would be routed through designated project accounts and periodic project-wise financial disclosures would be made to the CoC. The proposal also mandates compliance with project fund utilisation requirements under the Real Estate (Regulation and Development) Act, 2016 during CIRP.

3. Easier Handover of Possession to Genuine Homebuyers: To facilitate delivery of completed units, IBBI has proposed relaxing the present requirement of obtaining CoC approval under Regulation 4E. One option under consideration permits the RP to hand over possession of completed units and facilitate registration without prior CoC approval where the allottee has performed contractual obligations. Alternatively, the CoC may grant a one-time in-principle authorisation permitting the RP to process all such possession requests without requiring project-specific approvals.

4. Introduction of a Dedicated Claim Form for Homebuyers: The discussion paper proposes introduction of a simplified allottee-specific claim form (Form CA-R) designed to make claim submission easier for homebuyers. The proposed form captures details relating to the allottee, project, unit, financial exposure, possession status and preferred relief, including possession, registration, transfer of title or refund. The proposal seeks to improve participation by homebuyers and enable better collection of project-level information.

5. Identification and Disclosure of Homebuyer Preferences: The proposals recognise that different allottees may seek different outcomes from the insolvency process. Accordingly, RPs would be required to classify allottees according to the nature of relief sought and disclose such information project-wise in the Information Memorandum (IM). This information would be made available to prospective resolution applicants to facilitate preparation of more responsive resolution plans.

6. Enhanced Project-Wise Disclosures in Information Memoranda: To reduce information asymmetry and improve bidding quality, mandatory project-level disclosures are proposed in the IM. These disclosures include the number of sanctioned units, completed and under-construction inventory, sold and unsold units, project completion status, common facilities, statutory approvals and regulatory compliances. The proposal seeks to provide prospective resolution applicants with a comprehensive understanding of project-specific risks and completion requirements.

7. Independent Technical and Cost-to-Complete Assessment: IBBI has proposed mandatory appointment of independent professionals to conduct technical and cost-to-complete assessments for real estate projects at an early stage of CIRP. The assessment would include construction status, approvals, inventory, funding requirements, completion timelines and material risks. The reports would form part of the Information Memorandum and be shared with prospective resolution applicants.

8. Mandatory Contents of Resolution Plans: The discussion paper proposes minimum mandatory disclosures for resolution plans involving real estate projects. Resolution plans would be required to contain project-wise details regarding inventory, treatment of allottees, timelines for delivery, treatment of non-claimant allottees, consequences of buyer defaults and periodic reporting obligations to the monitoring committee.

9. Greater Representation of Homebuyers During Implementation: Recognising that implementation of real estate resolution plans often extends over long periods, IBBI has proposed mandatory inclusion of allottee representatives in monitoring committees. The proposal also contemplates participation of representatives nominated by Real Estate Regulatory Authorities (RERAs) and relevant land or development authorities where such authorities choose to participate.

10. Increased Transparency in the Functioning of Authorised Representatives: The discussion paper proposes disclosure of profiles of proposed authorised representatives at the public announcement stage and requires authorised representatives to share minutes of discussions held with creditors. CoC minutes would also be required to specifically record the views and concerns conveyed by authorised representatives on behalf of homebuyers.

11. Additional Safeguards Before Liquidation: Acknowledging that liquidation of real estate projects often destroys value and frustrates the expectations of homebuyers, the discussion paper proposes that liquidation should ordinarily be treated as a measure of last resort. Before recommending liquidation, the RP would be required to present a detailed note setting out efforts undertaken to explore completion-oriented solutions, including proposals from developers, investors, allottees or other stakeholders. The CoC would be required to record reasons for concluding that liquidation represents the most feasible option.

12. Strengthening Coordination Between Insolvency Professionals and RERA Authorities: IBBI proposes issuance of a circular enabling RPs to obtain project-related information from RERA authorities, including registration records, approved plans, escrow account details, allottee information and compliance records. The proposals also reiterate that CIRP does not exempt the corporate debtor from complying with applicable RERA requirements and contemplate consultation with RERA authorities while evaluating resolution plans.

13. Mandatory Disclosure of CIRP at Project Sites: The discussion paper proposes compulsory display of prominent signboards at project sites and offices of the corporate debtor indicating commencement of CIRP and providing contact details of the IRP or RP. The objective is to improve stakeholder awareness and enable timely communication by homebuyers, contractors and suppliers.

Conclusion

The discussion paper represents one of the most comprehensive attempts to develop a sector-specific insolvency framework for real estate projects under the Code. By emphasising project-wise resolution, homebuyer-centric outcomes, greater transparency and coordination with sectoral regulators, the proposals seek to shift the focus of real estate insolvency from recovery-oriented outcomes towards timely completion and delivery of projects.