IBBI amends insolvency rules to allow project-wise real estate resolution

The Insolvency and Bankruptcy Board of India has notified sweeping amendments to corporate insolvency regulations to establish project-wise resolution frameworks for stressed real estate developers. The new rules are designed to shield completed or financially viable housing projects from company-wide bankruptcy proceedings and accelerate home deliveries.

Under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2026, the regulatory changes take immediate effect. The framework addresses persistent structural bottlenecks where the financial collapse of a parent developer entity previously stalled construction and registration across an entire portfolio, regardless of individual project health.

A central feature of the amended regulations empowers the Committee of Creditors to recommend the exclusion of specific real estate projects from the corporate insolvency resolution process. Such a recommendation requires the backing of creditors holding at least 66 percent of the voting share and must include recorded reasons submitted to the Adjudicating Authority for final approval.

To establish granular financial discipline, resolution professionals are now mandated to maintain separate bank accounts for each distinct real estate project. These professionals must periodically place project-wise statements detailing receipts, payments, and fund utilisation before the Committee of Creditors, ensuring strict compliance with the Real Estate Regulation and Development Act.

Prior to inviting expressions of interest from prospective resolution applicants, the resolution professional must appoint qualified independent experts to conduct technical and cost-to-complete assessments. These evaluations must cover physical construction progress, statutory approvals, sold and unsold inventory, funding requirements, and delivery timelines to be incorporated into the information memorandum.

The amendments also formalise broader participation for homebuyers within the resolution architecture. Monitoring committees must now include designated representatives of allottees, alongside representatives from state real estate regulatory authorities where participation is agreed. Furthermore, resolution plans must explicitly detail how claims will be addressed through possession handovers, conveyance, or refunds.

Data compiled by regulatory committees indicate that real estate insolvencies have faced prolonged friction, with numerous ongoing admissions impacting vast numbers of homebuyers awaiting possession. Industry participants note that the shift toward project-specific segregation is expected to attract realistic financial bids and reduce legal disputes.

Implementation of the new regulations rests with resolution professionals and adjudicating authorities as pending and fresh insolvency applications align with the revised compliance mandates. Legal practitioners anticipate that judicial scrutiny will test the exclusion provisions as benches evaluate project independence during ongoing proceedings.