by THO
The Insolvency and Bankruptcy Board of India has recently amended the rules governing the corporate insolvency resolution process (CIRP), enabling distressed homebuyers to take possession of their properties while the resolution process is ongoing. The key objective of these amendments, which were notified earlier this month, is to prevent unnecessary and prolonged delays in handing over possession to homebuyers.
Effective immediately, these changes allow homebuyers to take possession during insolvency proceedings and ensure they have a voice in the resolution plans. The reforms are designed to offer much-needed relief to buyers and mitigate further financial losses, said legal experts.
One of the important changes empowers resolution professionals after obtaining approval of the Committee of Creditors and upon fulfilment of all obligations can now hand over possession of plots, apartments, or buildings to the homebuyers while the resolution process is still ongoing, the IBBI said.
These changes will help speed up the process, enhance efficiency in insolvency proceedings, particularly for real estate projects, by introducing measures such as appointing facilitators, involving land authorities in the process, and ensuring better monitoring of resolution plans, according to an IBBI release.
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The latest amendments to the CIRP Regulations bring forth the suggestions provided in the ‘Discussion Paper on issues related to Real Estate’ published by the IBBI in November 2024. Drawing from the decision of the Supreme Court in NOIDA v Lotus 300 Apartment Owners Association & Ors, the amendments now statutorily permit transfer of ownership and registration during the continuance of CIRP provided the allottee has fulfilled all obligations under the relevant agreement(s), explains Siddharth Srivastava, Partner, Restructuring & Insolvency, Khaitan & Co.
“With a surge in developer insolvencies leaving homebuyers trapped in legal battles and financial uncertainty, these amendments recognize them as key stakeholders, ensuring their interests are prioritized in resolution processes. The real focus is on stalled projects and distressed homebuyers, ensuring they get faster possession and fairer resolutions. By empowering resolution professionals and prioritizing homebuyers’ interests, these reforms are set to bring back trust, efficiency, and much-needed momentum to the real estate sector,” said Ketan Mukhija, Senior Partner, Burgeon Law.
Amendments introduced to streamline delivery of delayed housing units
The objective of this Amendment is to accelerate the delivery and possession of units/plots/apartment of stressed assets in the real estate sector undergoing corporate insolvency and to enhance the efficiency and effectiveness of real estate insolvency proceedings under the IBC, said Sandeep Bhuraria, senior partner, ZEUS Law Associates.
1. Handing over the possession to the allottees
Regulation 4E of the Amendment states that the Resolution Professional (“RP”) must obtain the approval of 66% of the committee of creditors (“COC”) of the corporate debtor to handover the possession and registration of unit(s) in the project.
“This approval is on the basis of the fact that the allottee(s) have requested for the possession and registration of unit(s) and completed their payment obligations before possession or transfer, ensuring sufficient funds for project completion. This is a welcome change and would help in considerably reducing the time for delivery of unit(s) to allottees,” explains Bhuraria.
2. Participation of Competent Authorities for faster Project Completion
The project handover depends on completing real estate developments, requiring approvals from the land-owning authorities. It is for this reason that Regulation 18(5) of the Amendment permits ‘Competent Authority’ as defined under Section 2(p) of the Real Estate (Regulation and Development) Act, 2016 , (e.g., NOIDA, GNIDA, YEIDA, DTCP, Haryana etc.) to participate in CoC meetings albeit without voting rights. The participation of the authority(ies) will help in ensuring that the land-owning authority(ies) facilitates the land-related issues and regulatory requirements to accelerate construction such as receiving Occupation Certificate/Completion Certificate from these authorities.
The Regulation 18(5) reads with Regulation 30C, which requires the resolution professionals to prepare a detailed report on development rights and the approvals required for a project. This amendment would aid in ascertaining approvals required to be undertaken for the completion of the project, he said.
The transfer of the title of the unit(s) can only be done with the approval of the landowner of the project, which may either be the ‘competent authority’ or a private entity. The introduction of Regulation 18(5) the Amendment is significant as the Competent Authority being represented in the CoC meetings would ensure that they provide valuable input prior during the CIRP period and also enhance the viability and feasibility of resolution plans. This amendment will considerably minimize the challenge to resolution plans and thus reduce delays and complication in project completion. This would effectively reduce the timeline for the completion of the project and handover, he added.
An important factor is the issuance of Occupation Certificate/ Completion Certificate. While some states, such as Haryana and Rajasthan, provide for ‘tower-specific’ Occupation Certificate/ Completion Certificate, the same may also be considered by other such authorities to ensure that the transfer of titles can be streamlined by the RP as the completion of the project(s) takes place, he explained.
3. Role of facilitators
The IBC previously only allowed for one authorised representative per class of creditors, regardless of the class size. The introduction of ‘Facilitators’ under Regulations 16C of the Amendment for large-scale real estate projects with more than a thousand (1000) allottees resolves this issue. Allottees can further form sub-classes, comprising at least 100 allottees, which constitution may be tower wise, and then propose to the ‘facilitator’ to present their issues, such as, possession and transfer, before the RP, the Authorised Representative and that particular sub-class of allottees.
Therefore, in order for the successful implementation of the Amendment, the RP, competent authorities and allottees have to work harmoniously to ensure that the object of accelerating the process of delivery of units is achieved, said Bhuraria.
Urgency for these amendments stems from the need to provide timely relief to distressed homebuyers.
The necessity for these changes arose from untimely delays in resolving real estate insolvencies, leaving homebuyers without possession or clarity on their investments. The existing framework did not allow homebuyers to take charge of stalled projects, and the absence of clear communication and regulatory involvement led to further complications. Addressing these gaps became crucial for protecting homebuyers’ interests and ensuring timely project completion.
As of 2024, only 160 cases of distressed projects had been resolved out of the 1760 cases admitted, as per IBBI data.
Zubin Morris, Partner, Little & Co explains that the need for these amendments was necessitated due to prolonged delays faced by homebuyers for their stalled real estate projects. Under the previous insolvency framework, homebuyers had limited control over the resolution process, often leaving them financially burdened and uncertain about their investments. Despite being financial creditors, they lacked direct decision-making power, and the absence of regulatory involvement and clear timelines further complicated the resolution process.
To address these issues, amendments were introduced vide notification dated February 3 2025, with immediate effect, with a pivotal aim to enhance efficiency in insolvency proceedings, particularly for real estate projects, by introducing measures such as appointing facilitators, involving land authorities in the process, and ensuring better monitoring of resolution plans.
Now, homebuyers can obtain possession of their properties during the resolution process if approved by the Committee of Creditors (CoC), where they hold significant influence.
Will it speed up the process?
These amendments are expected to accelerate the insolvency resolution process. By removing procedural delays and ensuring active participation from homebuyers, land authorities, and facilitators, project execution will become more efficient. Enhanced monitoring, better coordination, and streamlined decision-making will lead to quicker resolutions, finally bringing relief to homebuyers waiting for their homes, said Morris.
These amendments have evolved from the Amitabh Kant Report’s recommendations and will surely provide relief to many homebuyers, said Venkat Rao of Intygrat law firm.
The bottleneck until now was alienation of assets. The insolvency resolution professional could only run the company like a going concern, ensure that that the project construction was completed but could not transfer the units (to the buyers) as it could tantamount to corporate debtor’s assets being alienated, he explained.
“This addition to the principal regulations enables the process of handing over possession of built-up units to become more expedient, for persons who have been waiting for the handover of their completed units, or for those persons whose respective units were pending completion. The crux of this alteration to the principal regulations is to avoid unnecessary and inordinate delays in handover of possession to the end user,” said Yudhist Narain Singh, Senior Partner, YNS and Associates.
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