IBBI Amends Insolvency Regulations for Stressed Real Estate Projects

NEW DELHI: The Insolvency and Bankruptcy Board of India (IBBI) has notified amendments to regulations governing the Corporate Insolvency Resolution Process (CIRP) for corporate persons. The regulatory changes are designed to expedite the resolution of stressed real estate projects and address challenges faced by homebuyers and creditors.

IBBI operates as a key institution in implementing the Insolvency and Bankruptcy Code (IBC), providing a framework for market-linked and time-bound resolution of stressed assets. According to the regulatory body, the amendments aim to facilitate informed and viable resolutions, enhance transparency, and strengthen accountability for all stakeholders involved.

Under the revised framework, several procedural and operational changes have been introduced for real estate insolvencies involving multiple projects.

Project-Wise Financial Management: A separate bank account must now be maintained for each real estate project of the corporate debtor. Resolution Professionals (RPs) are required to place financial information for each project before the Committee of Creditors (CoC). Fund utilization requirements under the RERA Act must be strictly complied with during the resolution process, ensuring that funds contributed for a specific project are utilized exclusively for that project.

Project Exclusion and Monitoring: RPs must present all project-wise information—including completion stages, possession statuses, and occupancy details—during the first CoC meeting. This enables the CoC to identify and decide whether any specific project requires exclusion from the resolution process, subject to approval from the Adjudicating Authority (NCLT). This mechanism aims to minimize disruptions to completed and occupied projects.

Cost-to-Complete Assessments: Prior to inviting expressions of interest, RPs must appoint independent professionals, with CoC approval, to conduct technical and cost-to-complete assessments for each project. These assessments will form part of the information memorandum provided to prospective bidders to reduce information asymmetry and attract realistic bids.

Enhanced Disclosures and Homebuyer Participation: The information memorandum must now include comprehensive details concerning completed and under-construction units. Additionally, authorized representatives of homebuyers are required to submit meeting minutes to the RP for inclusion in CoC meetings, ensuring that customer concerns are officially recorded.

Monitoring and Delivery Timelines: Resolution plans must now incorporate clear project-wise, phase-wise, or tower-wise timelines for completion and delivery of possession. Periodic progress reports must be submitted to the monitoring committee, which may include representatives of homebuyers and relevant RERA authorities, subject to agreement.

"The amendments introduced by IBBI mark a progressive step toward bringing financial discipline and accountability to real estate insolvencies. By shifting the focus to project-wise treatment, cost-to-complete assessments, and ring-fenced bank accounts, the new framework addresses long-standing bottlenecks that previously delayed project delivery. These structural improvements will significantly reduce information asymmetry, restore confidence among homebuyers, and attract more realistic bids from prospective resolution applicants." — Dr. Shishir Gupta, Founder & CEO, StartupLanes