Homebuyers Allowed to Take Possession During Insolvency Process

In a landmark move to streamline the Corporate Insolvency Resolution Process (CIRP) and enhance transparency in real estate insolvencies, the Insolvency and Bankruptcy Board of India (IBBI) has introduced crucial amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The changes, notified under Reference No. IBBI/2024-25/GN/REG122 on February 3, 2025, aim to address longstanding delays in real estate projects, providing relief to homebuyers who have suffered due to stalled developments.

These amendments, developed after IBBI’s November 2023 discussion paper on real estate projects, primarily address prolonged delays in the handover of real estate units, ensuring that homebuyers can now take possession during the CIRP. Previously, homebuyers were left in the lurch as they had no control over stalled projects and were at the mercy of resolution proceedings.

Here are some of the major changes introduced:

1. For the first time, homebuyers who have fulfilled all obligations under the agreement can now take possession of their units while the resolution process is still ongoing. Previously, buyers faced prolonged uncertainty with stalled projects and had no control over resolution proceedings. Under Regulation 4E, the resolution professional must secure the approval from the Committee of Creditors (CoC) with not less than 66% of total votes before handing over possession and registration of units in an ongoing real estate project. This change significantly reduces waiting periods and bureaucratic hurdles, ensuring quicker deliveries.
2. Regulation 18(4) now allows land authorities like NOIDA and HUDA to participate in CoC meetings (without voting rights). Their involvement will help resolve land-related issues, fast-track approvals, and ensure completion certificates are obtained without unnecessary delays.
3. For sub-classes within large creditor classes (i.e., with more than 1,000 creditors), Regulation 16C envisages the appointment of facilitators. These facilitators would facilitate communication between the authorised representative and the creditors of the sub-class.
4. Resolution Professionals are now mandated to submit a comprehensive status report on a project’s development rights, approvals, and permissions within 60 days of CIRP initiation. This will enable creditors to assess project viability and make informed decisions swiftly.
5. Certain relaxations pertaining to eligibility criteria for submission of expression of interest, performance security, and deposit requirements may be provided to encourage homebuyer associations or groups to participate as resolution applicants. This change is aimed at empowering buyers to have a greater say in reviving stalled projects.
6. To ensure accountability and effective execution, the CoC is required to establish a Monitoring Committee, which will submit quarterly progress reports to the adjudicating authority, ensuring timely project completion.

The new amendments will reduce delays by eliminating procedural bottlenecks, ensure homebuyers have direct involvement in the resolution process, improve coordination between creditors, regulatory bodies, and developers, and enhance monitoring and oversight of project execution.