What is the Insolvency and Bankruptcy Code (IBC) impact on real estate projects?

The Insolvency and Bankruptcy Code has had a significant and complex impact on Indian real estate, providing a formal resolution mechanism for insolvent developers while creating uncertainty for homebuyers whose interests compete with financial creditors.

How IBC Applies to Real Estate

• Insolvent developers can be admitted to Corporate Insolvency Resolution Process
• Resolution professional manages the developer entity during the process
• Resolution plan approved by committee of creditors and NCLT

Impact on Homebuyers

• Homebuyers recognized as financial creditors under IBC amendments
• Entitled to representation in the committee of creditors
• Often face delays and partial recovery in resolution processes

Resolution Outcomes Observed

• Some projects acquired by new developers for completion
• Liquidation in cases where no viable resolution plan is found
• SWAMIH and other funds providing alternatives to IBC for some projects

The IBC has provided a formal framework for resolving developer insolvencies, but its application to real estate remains challenging given the need to balance the interests of financial creditors, homebuyers, and the goal of project completion.