For years, homebuyers in India have found themselves trapped in a never-ending legal limbo, watching their dream homes slip further out of reach as developers went bankrupt. The struggle of waiting indefinitely for possession, navigating complex insolvency proceedings, and facing financial distress has long plagued thousands of homebuyers. However, a recent breakthrough by the Insolvency and Bankruptcy Board of India (IBBI) is set to change the game.

In a significant move, IBBI has made some amendments in its policies to allow the handover of properties to buyers even while the insolvency proceedings are ongoing. This means the homebuyers no longer have to wait until the long-drawn resolution process is completed before they can take possession of their house. This shift not only offers relief to those who have been waiting for years but also builds confidence in the Indian real estate sector, which has faced a credibility crisis in the past due to stalled projects.

Homebuyers No Longer at the Mercy of Insolvency Proceedings

Earlier, when a developer used to get bankrupt,  homebuyers were left stranded. Even though they had invested their hard-earned money, they ranked lower in priority when it came to recovering their stakes. Banks and financial institutions—the primary lenders—took precedence, often leaving homebuyers in a tough spot. The new amendments have now changed the power dynamics significantly. 

The revised regulations allow homebuyers in India who have fulfilled their contractual obligations to take possession of their homes while the insolvency resolution process is ongoing. However, this requires the consent of at least two-thirds (66%) of the financial creditors involved in the case. This modification empowers homebuyers and provides them with a chance to reclaim their rightful property.

How Will This Benefit Homebuyers in India?

• No More Indefinite Waiting – Buyers can now take possession of their properties even before the case is fully resolved in court.

• Reduced Financial Burden – Many homebuyers are stuck paying both rent and EMIs due to delayed possession. This rule will ease their financial strain.

• Enhanced Buyer Confidence – A streamlined process will encourage more people to invest in under-construction projects without fearing that their investment will be lost.

• Stability in the Real Estate Market – The move will ensure fewer stalled projects, helping to revive consumer trust in the sector.

Facilitators and Land Authorities Step In

Another significant change introduced by IBBI is the inclusion of ‘facilitators’ for large groups of homebuyers. These facilitators will represent homebuyers in key meetings with financial creditors, ensuring that their interests are actively considered in the debt resolution process. This will particularly help in cases where thousands of homebuyers are involved, making collective representation more organized and effective.

Moreover, the participation of land agencies like the Noida and the Haryana Urban Development Authority (Huda) has been allowed in creditor meetings. Their involvement will improve transparency, feasibility, and the overall effectiveness of resolution plans. This marks a major step towards a more structured and collaborative insolvency resolution framework.

Common Administrator for Multiple Bankrupt Companies

In a bid to streamline the insolvency resolution of companies belonging to the same group, IBBI has proposed a common administrator for multiple bankrupt companies within a group. This is a much-needed reform since many real estate firms operate under multiple legal entities. A common administrator will allow for better coordination, reducing delays and improving resolution outcomes.

Currently, India’s insolvency laws do not have a specific framework for group insolvency. While the government has been working on it, the process is yet to be formally incorporated into the Insolvency and Bankruptcy Code (IBC). Until then, this proposal will allow administrators to align debt resolution efforts for interconnected businesses.

Bottom Line

The Indian real estate sector has long been plagued by unfinished projects, legal tangles, and financial uncertainty. The recent amendments by IBBI provide a ray of hope for homebuyers who have been waiting for years. By allowing buyers to take possession of their homes during insolvency proceedings, introducing facilitators for better representation, and proposing a common administrator for group insolvencies, the changes aim to restore faith in the system.

While challenges remain, these reforms set the stage for a more transparent, efficient, and consumer-friendly approach to real estate insolvency in India. If executed well, they could pave the way for a more stable and trustworthy property market, benefiting both homebuyers and developers in the long run.