Homebuyers across the country are set to gain significant relief from the Insolvency and Bankruptcy Board of India’s (IBBI) proposed reforms to streamline the insolvency process for real estate companies. With the proposed changes, the biggest pain point for homebuyers—delayed possession—is slated to be taken care of.

The amendments, aimed at addressing long-standing challenges under the Insolvency and Bankruptcy Code (IBC), promise timely possession, fairer claim valuation and increased transparency.

One of the key proposals empowers the insolvency professionals to transfer possession or ownership of units to homebuyers who have met their financial commitments, provided the committee of creditors (CoC) approves the same.

This could resolve delays that have left numerous buyers stranded in incomplete projects in key property markets of the country.

“The proposed reforms are a balanced attempt to address systemic inefficiencies in the real estate insolvency framework,” said Sudip Mullick, partner, Economic Laws Practice. “By aligning the interests of homebuyers, creditors and developers, these measures lay the groundwork for a more robust, transparent and equitable real estate sector. With effective implementation, these changes could not only provide immediate relief to affected stakeholders but also reinforce long-term confidence in India's real estate market.”

Under the proposed changes, to ensure transparency, homebuyers will have access to CoC meeting minutes through a secure online platform, helping to counter misinformation and allowing buyers to stay informed about the status of their investments.

“These proposed changes are aiming to address critical inefficiencies in the insolvency process for the real estate sector,” said Niranjan Hiranandani, chairman, NAREDCO. “By improving stakeholder representation, it ensures all voices are adequately heard in decision-making. The emphasis on fairness in claim valuation addresses long-standing grievances about inconsistent treatment of homebuyer claims, while the streamlined approach to possession handovers seeks to resolve delays that have left many projects incomplete.”

Real estate developers may also benefit from a more structured and efficient resolution framework. By resolving regulatory bottlenecks through the inclusion of land authorities in CoC deliberations, projects stand a better chance of completion. Developers will also benefit from reforms enabling faster possession transfers, which can help restart stalled projects and reduce litigation risks.

Additionally, standardising an 8% annual interest rate for claim valuations ensures a fairer representation of homebuyer claims in the insolvency process.

However, homebuyers also highlighted that their interests need to be protected by discounting costs and adjustments required to complete the unit in the project and the sum he or she has agreed as a total consideration.

The proposed measures also address key concerns for lenders and financial creditors. Land authorities, crucial stakeholders in real estate projects, are proposed to be included as non-voting invitees in CoC meetings and their inputs on regulatory matters are expected to improve the viability of resolution plans.

To handle large creditor classes, IBBI has suggested appointing facilitators to streamline communication and representation. Additionally, the mandatory reporting of land allotment cancellations to the CoC ensures financiers can make informed decisions about continuing projects or pursuing liquidation.