IBBI Committee Recommends Project-wise Insolvency Resolution for Real Estate Cases

Insolvency and Bankruptcy Board of India Recommends Project-Wise Resolution for Stressed Real-Estate Assets

The Insolvency and Bankruptcy Board of India (IBBI) has released a report recommending that the resolution process for stressed assets of real-estate companies be conducted on a project-wise basis, as opposed to the current practice of pulling the entire company into insolvency. This recommendation comes in response to the Supreme Court's directive on September 12, 2025, in the Mansi Brar judgement, which instructed the IBBI to frame specific guidelines to ensure real estate insolvency cases are examined on a project-specific base as a "matter of rule".

According to the report, released on April 8, the corporate insolvency resolution process (CIRP) in the real estate sector should "ordinarily be admitted on a project-wise basis, with each real estate project treated as an independent unit for the purposes of insolvency admission and resolution". This approach has been a key ask of the industry, which currently lacks explicit mention in the Insolvency and Bankruptcy Code. However, IBBI guidelines do permit resolution professionals to invite separate resolution plans for specific projects or assets of a company.

The report notes that a lack of clear statutory guidelines leaves room for project-wise insolvency to be challenged in courts due to non-alignment of the law and regulations. To address this issue, the report recommends that admission of CIRP may be confined to the defaulting project, and "solvent, completed or unrelated projects of the same developer may not be included".

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The committee also suggests that entity-level (the Corporate Debtor) CIRP encompassing multiple projects may be permitted only in exceptional circumstances, including substantial inter-linkages or commingling of funds across projects, cross-collateralisation of assets or guarantees, or demonstrable fraud or mismanagement affecting multiple projects.

In addition, the report recommends that the regulations should explicitly state that the "clean-slate" protection extends to all real estate-specific liabilities, including property taxes, external development charges (EDC), and regulatory penalties accrued prior to the plan approval. Furthermore, the report suggests that there should be a waiver of all penal interest and fines upon approval of the resolution plan, and municipalities and development authorities should refrain from withholding future approvals (OC/CC) on the grounds of pre-CIRP arrears that were settled under an approved resolution plan.