India is preparing for a major shift in how real estate bankruptcies are handled, after a top committee under the Insolvency and Bankruptcy Board of India (IBBI) recommended a project-by-project resolution framework aimed at protecting homebuyers and improving recovery outcomes. The proposals, which are part of a broader set of 155 recommendations, seek to make insolvency processes more efficient, predictable, and focused on completing viable housing projects rather than liquidating entire developer portfolios.
The committee, formed following a Supreme Court directive in September 2025, has suggested that stressed real estate companies should not automatically have all their projects pulled into bankruptcy proceedings. Instead, each project should be treated independently, allowing healthy or near-complete developments to continue outside the insolvency court system. Completed or substantially completed projects, in particular, would be excluded from the bankruptcy estate altogether, a move seen as crucial to preventing delays and financial losses for homebuyers.
At the heart of the proposal is the idea that corporate-level insolvency should apply only in cases involving fraud, fund diversion between projects, or misuse of one project’s assets to finance another. In all other situations, resolution should be carried out at the project level, ensuring that financial stress in one development does not automatically jeopardize unrelated or financially stable projects under the same builder.
Industry experts and stakeholders have broadly welcomed the recommendations, arguing that they could restore confidence in India’s real estate sector, which has long struggled with delayed projects, stalled deliveries, and investor distrust. Real estate and construction account for a significant share of insolvency cases in India, making the sector one of the most affected under the current bankruptcy framework.
According to the committee, protecting viable projects from being dragged into insolvency proceedings would help safeguard homebuyers from losses, including potential financial haircuts or extended delays in receiving possession of their homes. It also proposes strengthening transparency through separate project accounts aligned with escrow practices under real estate regulation laws, ensuring that funds are not mixed across developments.
The recommendations also include a proposal to increase the insolvency initiation threshold for builders from ₹1 crore to ₹5 crore, reflecting the large scale of real estate projects and aiming to prevent smaller disputes from triggering full bankruptcy proceedings. Additionally, the panel has suggested allowing resolution professionals to directly hand over completed homes to buyers even while insolvency cases are ongoing, further reducing uncertainty for end-users.
Another key feature of the proposal is the possible integration of the SWAMIH fund, a government-backed initiative designed to provide last-mile financing for stalled housing projects. This mechanism could be used to support distressed developments during insolvency resolution, helping ensure their completion rather than liquidation.
The committee has also emphasized stricter scrutiny of bankruptcy petitions filed by homebuyers, distinguishing between genuine end-users and speculative investors seeking financial gains through legal proceedings. However, it has maintained that all recognized allottees should receive uniform legal treatment once admitted into the insolvency process, ensuring consistency in outcomes.
If adopted by the government, the recommendations would be implemented through regulatory changes by the IBBI, marking a significant structural reform in India’s insolvency framework. Legal and industry observers believe the shift toward project-wise resolution could reduce litigation, improve recovery timelines, and increase investor confidence in the sector.
However, the success of the reforms will depend on careful implementation, particularly in balancing the interests of homebuyers, lenders, and developers. While the approach is widely seen as a step toward greater efficiency and protection of housing investments, experts caution that enforcement clarity and institutional coordination will be essential to avoid new layers of complexity.
The proposed overhaul reflects a broader policy direction aimed at prioritizing completion of housing projects over liquidation, reinforcing the idea that real estate insolvency should ultimately serve value preservation and delivery rather than asset dismantling.
