IBBI lets creditors keep completed housing projects out of a builder's insolvency process
In one line: IBBI's regulations of 30 October 2026 let creditors recommend excluding viable or completed projects from a developer's insolvency, and ring-fence each project's money and information.
Published 1 November 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency Resolution Process for Corporate Persons (Fifth Amendment) Regulations, 2026 on 30 October 2026, effective from their publication in the Official Gazette. They change how the corporate insolvency resolution process (CIRP) works when the debtor is a real estate developer. The core change is project-wise treatment. Where a developer has more than one project, the resolution professional (RP) must place each project's details before the committee of creditors (CoC) at its first meeting: RERA registration, stage of completion, possession and occupancy status, and completed and incomplete units. The CoC may then, with at least 66% of the voting share and recorded reasons, recommend that a project be excluded from the CIRP. The RP applies to the Adjudicating Authority, the National Company Law Tribunal (NCLT), which decides.
Other changes strengthen homebuyers' hand. The RP must keep a separate bank account for each project (a requirement since February 2024), report project-wise receipts and payments to the CoC, and follow the fund-use rules of the Real Estate (Regulation and Development) Act, 2016 (RERA). Before inviting resolution applicants, the RP must, with CoC approval, appoint independent professionals for a project-wise technical and cost-to-complete assessment covering construction progress, approvals, inventory, completion cost, funding needs, timelines and risks; it goes into the information memorandum given to bidders. Homebuyers get a choice of three insolvency professionals as their authorised representative, and the monitoring committee that oversees a resolution plan must include an allottee representative and, if they agree, a RERA representative. Resolution plans must state how allottees' claims (possession, conveyance or refund) will be treated and set project, phase or tower-wise timelines.
The background is a long-running problem. Since a 2018 amendment, homebuyers have been treated as financial creditors under the Insolvency and Bankruptcy Code, 2016 (IBC), but when a developer's whole company enters insolvency, every project, including nearly finished ones, is frozen. Business Standard reported that an IBBI discussion paper in June 2026 said homebuyers mainly want "completion and delivery of homes rather than financial recovery", and that a committee report found 221 of 553 admitted real estate cases still ongoing as of 30 September 2025, involving about 1,08,887 homebuyers. The new rules aim at viable, project-level resolution. Their success will depend on how readily NCLT benches accept exclusion requests and how quickly assessments are done.
Prelims facts
- IBBI notified the CIRP (Fifth Amendment) Regulations, 2026 on 30 October 2026 for real estate insolvency.
- The committee of creditors can recommend excluding an individual real estate project from CIRP with at least 66% of the voting share; the NCLT decides.
- The resolution professional must keep a separate bank account for each project and follow RERA fund-use rules.
- A project-wise technical and cost-to-complete assessment must be done before resolution applicants are invited and included in the information memorandum.
- Monitoring committees for real estate debtors must include an allottee representative and, with consent, a RERA representative.
Quick recall
- When did IBBI notify the CIRP (Fifth Amendment) Regulations, 2026?
- 30 October 2026.
- What vote does the CoC need to recommend excluding a real estate project?
- At least 66% of the voting share, with reasons recorded.
- Who decides on a recommendation to exclude a project from CIRP?
- The Adjudicating Authority, that is, the NCLT.
- What must the RP maintain for each real estate project?
- A separate bank account, with project-wise statements of receipts and payments.
- What assessment must precede the invitation to resolution applicants?
- A project-wise technical and cost-to-complete assessment by independent professionals.
- How many insolvency professionals must homebuyers be offered as authorised representative?
- A choice of three.
- Which amendment made homebuyers financial creditors under the IBC?
- The 2018 amendment to the IBC.
- Which judgment upheld homebuyers' status as financial creditors?
- Pioneer Urban Land and Infrastructure Ltd v. Union of India (2019).
Prelims practice question
Under the IBBI's Fifth Amendment Regulations, 2026, what minimum share of votes in the committee of creditors is needed to recommend excluding a real estate project from the corporate insolvency resolution process?
- 51%
- 60%
- 66%
- 75%
Show answer
Answer: (c) 66%. The regulations require not less than 66% of the voting share, with reasons recorded. The resolution professional then applies to the Adjudicating Authority (NCLT), which decides. 66% is also the threshold for approving a resolution plan under Section 30(4) of the IBC.
Use this in UPSC Mains: previous-year questions
Recurring theme: Resolving stressed assets: the IBC, its institutions and protection of homebuyers
What is the quasi-judicial body? Explain with the help of concrete examples.
How to use thisUse the NCLT's role in real estate insolvency as a concrete example of a quasi-judicial body applying law to disputes.
- Under the IBC, the NCLT is the Adjudicating Authority, which decides on applications such as the exclusion of a project from insolvency.
- Under IBBI's 2026 regulations, a CoC recommendation to exclude a housing project takes effect only when the NCLT decides on it.
UPSC tests the toolkit for stressed assets; the IBC and its regulations, like the 2026 real estate changes, are the main statutory route today.
Mains practice question
Treating a real estate developer's insolvency as one undivided case has hurt homebuyers. Examine how the IBBI's 2026 project-wise reforms address this, and what challenges remain. (250 words)
Model answer
On 30 October 2026 the IBBI notified the CIRP (Fifth Amendment) Regulations, 2026, moving real estate insolvency from company-wide to project-wise resolution.
The problem
- Homebuyers have been financial creditors since the 2018 IBC amendment, upheld in Pioneer Urban Land (2019).
- Yet one developer's default froze all its projects, including near-complete ones.
- A committee report found 221 of 553 admitted real estate cases ongoing as of 30 September 2025, involving about 1,08,887 homebuyers.
What the 2026 regulations do
- Project exclusion: CoC can recommend excluding a project with at least 66% of the voting share; NCLT decides.
- Ring-fenced money: project-wise receipts and payments statements to the CoC; RERA fund-use rules apply.
- Better information: independent technical and cost-to-complete assessment of each project, placed in the information memorandum.
- Homebuyer voice: choice of three authorised representatives; allottee and RERA representatives on the monitoring committee.
- Delivery focus: resolution plans must state treatment of allottee claims and tower-wise timelines.
Significance
- Aligns insolvency with homebuyers' main aim: completion and delivery rather than recovery.
- Lets viable projects attract bidders separately.
- Improves RERA and IBC coordination.
Challenges
- NCLT delays and backlog may slow exclusion decisions.
- Lenders with security over land may resist exclusion.
- Assessments add cost and time to CIRP.
- Fragmented approvals from land authorities remain.
Way forward
- Time limits for NCLT decisions on exclusion; stronger RERA monitoring; stressed-asset funds for last-mile completion.
Project-wise resolution is a sensible shift, but its value depends on speed at the NCLT.
The basics
Why this matters
The Insolvency and Bankruptcy Code, 2016 changed how Indian lenders recover money from failing firms. Real estate exposed its limits: a builder's failure can leave thousands of families without the homes they paid for. The IBBI's October 2026 regulations try to fix this by treating each housing project separately. For the exam, you need the basic machinery of the IBC, the role of homebuyers, and the link with RERA.
The IBC in brief
When a company defaults, a creditor can apply to the National Company Law Tribunal. If the case is admitted, the company's board is suspended and a resolution professional runs it. Financial creditors form the Committee of creditors, which approves or rejects bids to rescue the company. If no plan is approved, the company is liquidated.
- 1Default and applicationA financial creditor, operational creditor or the company itself applies to the NCLT
- 2AdmissionNCLT admits the case; a moratorium stops suits against the debtor
- 3Resolution professional takes chargeBoard suspended; claims collected; committee of creditors formed
- 4Bids invitedInformation memorandum shared; resolution applicants submit plans
- 5ApprovalPlan needs at least 66% of CoC votes, then NCLT approval; otherwise liquidation
Where homebuyers fit
A 2018 amendment made Homebuyers as financial creditors, so they sit on the committee of creditors through an authorised representative. This gave them votes, but also exposed a mismatch: banks want recovery, buyers want flats.
- All projects frozen together
- Near-complete towers stuck with failing ones
- Bidders must take the whole company
- CoC can recommend excluding a project with 66% votes
- Project-wise statements of receipts and payments to the CoC
- Project-wise cost-to-complete assessment for bidders
RERA and IBC, side by side
The Real Estate (Regulation and Development) Act, 2016 already requires each project to be registered and most buyer money to be kept in a separate account. The 2026 regulations import this ring-fencing into insolvency, and bring RERA representatives into the monitoring committee. The Insolvency and Bankruptcy Board of India wrote these rules as the regulator of the insolvency process.
Go deeper
Why it matters for UPSC
The IBC is a core GS3 topic (banking, stressed assets, ease of doing business), and real estate insolvency links it to urban housing and consumer protection. Prelims can ask about thresholds, bodies and laws.
The core idea
The Insolvency and Bankruptcy Board of India regulates the insolvency process. Since 2018, Homebuyers as financial creditors vote in the Committee of creditors. But a developer usually runs many projects, and company-wide insolvency froze them all. The new rules make resolution project-wise and borrow the ring-fencing logic of the Real Estate (Regulation and Development) Act, 2016.
Numbers and dates to remember
- 30 October 2026: Fifth Amendment Regulations notified.
- 66%: CoC vote to recommend excluding a project; also the vote to approve a resolution plan.
- 3: insolvency professionals offered to homebuyers as authorised representative.
- 221 of 553: admitted real estate cases ongoing as of 30 September 2025 (committee report, via Business Standard).
- 2018: homebuyers become financial creditors.
Where to go next
- Insolvency and Bankruptcy Board of India: who writes the rules.
- Committee of creditors: who decides a company's fate.
- Homebuyers as financial creditors: how buyers got a vote.
- Real Estate (Regulation and Development) Act, 2016: the sector law that meets the IBC.
Go deeper: can insolvency law deliver homes?
Why company-wise resolution failed buyers. The IBC was designed to maximise the value of a whole firm. In real estate, value sits in individual projects with separate land, approvals and buyers. When Homebuyers as financial creditors voted in the Committee of creditors, they wanted completion, while banks wanted recovery. Near-complete towers were stuck with failed ones, and bidders had to take on the whole company.
What the 2026 rules change. Exclusion of projects on a 66% CoC vote, project-wise accounts reporting, independent cost-to-complete assessments and tower-wise timelines in plans bring the logic of the Real Estate (Regulation and Development) Act, 2016 into insolvency. The rules of the Insolvency and Bankruptcy Board of India aim to prevent disruption to "completed and occupied projects" when a developer becomes insolvent.
Concerns. Exclusion still needs NCLT approval, and tribunal delays are a known weakness of the IBC. Secured lenders may resist exclusion of projects on land they hold as security. Independent assessments add cost, which is borne as CIRP cost. Land authorities' dues and approvals can still block completion.
Judicial background. In Pioneer Urban Land and Infrastructure Ltd v. Union of India (2019) the Supreme Court upheld homebuyers' status as financial creditors. A 2020 amendment required at least 100 allottees or 10% of allottees of the same project, whichever is less, to start a case, which the Court upheld in Manish Kumar v. Union of India (2021). The 2026 rules work within this framework.
Insolvency and Bankruptcy Board of India
The regulator that wrote the new rules
In one line: The IBBI is the statutory regulator under the Insolvency and Bankruptcy Code, 2016 that oversees insolvency professionals, agencies and information utilities and writes the process regulations.
What it does
It registers and regulates insolvency professionals, insolvency professional agencies and information utilities, and frames regulations for corporate insolvency resolution, liquidation and voluntary liquidation. It does not decide cases; that is the job of the Adjudicating Authority, the NCLT for companies.
Why it is in the news
Using its powers under Sections 196 and 240 of the IBC, it notified the Fifth Amendment Regulations, 2026 on 30 October 2026, overhauling real estate insolvency.
Where to go next
Insolvency and Bankruptcy Board of India: every story that connects to it (2)
Committee of creditors
The body that decides whether a company is rescued
In one line: The committee of creditors (CoC) is the body of financial creditors that takes key commercial decisions during a corporate insolvency case.
Role
The CoC approves or rejects resolution plans, decides on extensions and major actions of the resolution professional, and votes in proportion to the debt owed to each member. A resolution plan needs at least 66% of the voting share under Section 30(4) of the IBC. Courts have held that the CoC's commercial wisdom is largely not open to judicial review.
Why it is in the news
Under the 2026 regulations, the CoC can recommend, with at least 66% votes, that a real estate project be excluded from the process. Homebuyers sit in the CoC as a class through an authorised representative.
Where to go next
Homebuyers as financial creditors
How flat buyers got a vote in insolvency
In one line: Since a 2018 amendment to the IBC, amounts paid by allottees of real estate projects count as financial debt, making homebuyers financial creditors.
How it came about
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 added an explanation to the definition of financial debt to cover amounts raised from allottees. In Pioneer Urban Land and Infrastructure Ltd v. Union of India (2019), the Supreme Court upheld this. A 2020 amendment then required at least 100 allottees or 10% of allottees of the same project, whichever is less, to file a case, which the Court upheld in 2021.
Why it matters now
As financial creditors, homebuyers vote in the CoC, often as the largest class. The 2026 regulations give them a choice of representatives and a seat on monitoring committees.
Where to go next
Real Estate (Regulation and Development) Act, 2016
The sector law whose ring-fencing the new rules borrow
In one line: RERA regulates the real estate sector through state regulatory authorities, project registration and protection of buyers' money.
Key features
Projects above the thresholds in the Act (land over 500 square metres or more than eight apartments) must be registered with the State Real Estate Regulatory Authority. Promoters must deposit 70% of amounts realised from allottees in a separate account, to be used only for that project's construction and land cost. Appellate tribunals hear appeals.
Why it is in the news
The 2026 IBBI regulations require the resolution professional to follow RERA fund-use rules, keep project-wise accounts, and include RERA representatives in monitoring committees.
Where to go next
Take the 1 November 2026 quiz: 30 Prelims-style questions with answers