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Insolvency and Bankruptcy Code & Real Estate

By July 19, 2023No Comments

The Insolvency and Bankruptcy Code (IBC) has had a significant impact on various sectors of the Indian economy, including the real estate sector. Enacted in 2016, the IBC aimed to streamline the insolvency resolution process and provide a time-bound mechanism for resolving stressed assets. In the real estate sector, the IBC has been instrumental in addressing the challenges of project delays, funding shortages, and non-completion of projects. Here are some of the latest developments and news related to the Insolvency and Bankruptcy Code and its impact on the real estate sector:


Inclusion of Real Estate in IBC: One of the most critical developments concerning the IBC and real estate was the inclusion of real estate projects under its purview. Prior to the IBC, there was no formal mechanism to address the insolvency of real estate developers. With the inclusion of real estate projects in the IBC, a transparent and structured process for resolving distressed real estate projects was established.


Homebuyers as Financial Creditors: To safeguard the interests of homebuyers who had invested in under-construction projects, the government amended the IBC to classify them as financial creditors. This recognition allows homebuyers to participate in the insolvency process and have a say in the resolution of the distressed project.


Insolvency Proceedings Against Real Estate Developers: Following the inclusion of real estate projects in the IBC, several high-profile real estate developers faced insolvency proceedings due to financial distress and project delays. The IBC provided a formal mechanism for creditors, including homebuyers, to initiate insolvency proceedings against defaulting developers.


Resolutions and Asset Sales: The IBC-led insolvency proceedings have led to the resolution of several stressed real estate projects. In some cases, the National Company Law Tribunal (NCLT) approved resolution plans submitted by potential buyers or other developers, leading to the takeover and completion of projects.


In other instances, the IBC facilitated the sale of distressed real estate assets to other developers or investors. These asset sales have been instrumental in reviving stalled projects and providing relief to homebuyers who were stuck in limbo due to project delays.


Challenges and Litigations: While the IBC has shown promise in resolving distressed real estate projects, there have been challenges and litigations along the way. Disputes related to the status of homebuyers as financial creditors, delays in the approval of resolution plans, and complexities of the real estate sector have led to legal challenges and prolonged resolution processes.


Focus on Completion and Homebuyer Interests: One of the primary objectives of the IBC is to ensure the completion of stalled real estate projects and protect the interests of homebuyers. The NCLT and resolution professionals have been working diligently to prioritise these objectives during the insolvency resolution process.


Impact on Real Estate Investors and Lenders: The inclusion of real estate in the IBC has had implications for real estate investors and lenders as well. Lenders have been actively participating in the resolution process to recover their dues, while real estate investors have shown interest in acquiring distressed assets at discounted prices.


Amendments to Enhance Effectiveness: To address various challenges faced during the implementation of the IBC in the real estate sector, the government has periodically introduced amendments to enhance the effectiveness of the resolution process. These amendments have aimed to address specific sector-related issues and improve the overall resolution mechanism.



The Insolvency and Bankruptcy Code has brought significant changes to the real estate sector in India, providing a formal and structured mechanism for resolving distressed projects and safeguarding the interests of homebuyers. While the IBC’s inclusion of real estate has been a positive step towards addressing the challenges faced by the sector, there have been challenges and litigations that require further attention.

As the implementation of the IBC in the real estate sector continues to evolve, it is expected to play a vital role in revitalizing stalled projects, protecting the interests of homebuyers, and bringing greater transparency and accountability to the Indian real estate industry.


Author kjac

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