The Insolvency and Bankruptcy Board of India (IBBI) has proposed a major shift in how bankrupt developers are handled. By moving away from company-wide liquidation, the new framework aims to isolate and finish individual stalled projects. This move is designed to help over 2.5 lakh homebuyers currently stuck in insolvency proceedings across 553 active cases, prioritizing possession over asset stripping.
The Insolvency and Bankruptcy Board of India (IBBI) is pushing for a significant change in how the law handles bankrupt real estate developers. Based on a discussion paper released in July 2026, the regulator wants to move away from treating a developer’s entire portfolio as a single sinking ship. Instead, the proposal suggests a project-wise resolution process that prioritizes the completion of homes over the liquidation of the developer's assets.
Currently, when a large real estate developer faces insolvency, all their projects are thrown into a single legal process. This often means that even healthy or near-complete buildings are dragged into the same legal delays as abandoned or failed projects. This hurts homeowners who are close to getting their keys. The proposed framework aims to fix this by allowing for the segregation of projects. Under these new rules, completed or nearly complete projects could be separated from the rest, insulating residents and their properties from the parent company's broader financial collapse.
To ensure this actually works, the IBBI is focusing on two main areas: transparency and liquidity. First, the proposal mandates that Resolution Professionals (RPs) must hire independent technical agencies to audit construction status and actual remaining costs. This ensures that new developers taking over the site have accurate data, rather than relying on records that may have been inflated or obscured by the previous management. Second, the plan seeks to keep RERA-mandated project accounts operational. In the past, these accounts were often frozen as soon as insolvency proceedings began, which stopped all construction work. The new proposal allows these accounts to function under strict supervision to keep money flowing into the construction site rather than getting stuck in legal limbo.
This is a critical issue for the Indian real estate sector. While the insolvency framework has already helped approximately 1.4 lakh homebuyers move closer to possession, there are still about 2.5 lakh homebuyers waiting for clarity across 553 ongoing insolvency cases. By treating projects individually, the IBBI hopes to clear these backlogs more efficiently, ensuring that the goal remains building homes rather than just selling off land to pay back banks.
However, the path to implementation is not without challenges. Investors and homebuyers should note that while the policy framework is shifting, legal hurdles remain. Protracted litigation and appeals can still delay projects even if the new rules are adopted. Furthermore, there is a risk of an implementation gap between what the National Company Law Tribunal (NCLT) approves and what happens on the ground. Conflicting interests between financial lenders, who want their money back, and homebuyers, who want their flats, will likely persist. The success of this move will depend on how quickly and effectively these new rules can be applied to existing cases without triggering further legal disputes.