IBBI Rule Amendment empowers Homebuyers to claim Possession in Insolvency

Insolvent homeowners can now take ownership of their residences while the resolution procedure is underway according to a recent amendment to the regulations regulating the corporate insolvency resolution process (CIRP) made by the Insolvency and Bankruptcy Board of India. These revisions were disclosed earlier this month with the primary goal of avoiding needless and protracted delays in granting purchasers possession.

These modifications, which take effect immediately, guarantee that purchasers have a say in the resolution plans and permit them to take possession during insolvency proceedings. 

According to legal experts, the amendments are intended to provide buyers with much-needed relief and prevent more financial losses.

According to the IBBI, one of the significant modifications gives resolution experts the authority to transfer ownership of plots, apartments, or buildings to homebuyers while the resolution process is still in progress, provided they have received consent from the Committee of Creditors and all requirements have been fulfilled.

By introducing measures like appointing facilitators, involving land authorities in the process, and ensuring better monitoring of resolution plans, these changes will help speed up the process and enhance efficiency in insolvency proceedings, especially for real estate projects, according to an IBBI release.

The recommendations made in the IBBI's November 2024 "Discussion Paper on concerns relating to Real Estate" are incorporated into the most recent revisions to the CIRP Regulations.

According to Sandeep Bhuraria, senior partner at ZEUS Law Associates, the goal of this amendment is to improve the efficiency and efficacy of real estate insolvency proceedings under the IBC and expedite the delivery and possession of units, plots, or apartments of stressed assets in the real estate sector going through corporate insolvency.

Untimely delays in resolving real estate insolvencies necessitated these modifications since they left homebuyers without possession or clarification regarding their investments. Homebuyers were unable to take control of stalled projects under the current structure, and further issues resulted from unclear communication and a lack of regulatory participation. In order to safeguard homeowners' interests and guarantee project completion on schedule, it became imperative to close these gaps.

According to IBBI data, as of 2024, just 160 of the 1760 cases of distressed projects that were admitted had been handled.

“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.