IBBI Opens a Route to Exclude a Real Estate Project From a CIRP
A builder in insolvency is usually several builders at once, with projects at different stages and different sets of allottees. The regulations now open a route to exclude a real estate project from the process, on a sixty-six per cent committee vote followed by an order, and that one route changes how a real estate insolvency has to be run from the first meeting onwards.
What Was Notified
The Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2026 on October 30, 2026, by Notification No. IBBI/2026-27/GN/REG155. They are made under clauses (aa) and (t) of sub-section (1) of section 196 read with section 240 of the Insolvency and Bankruptcy Code, 2016, and commence on publication in the Official Gazette.
Two companion items carry the same date, one on claims by allottees and one a circular on compliance with the real estate regulator and on disclosure of the process at project and office sites. The Board announced the package the following day as strengthening the framework for corporate debtors having real estate projects.
The Exclusion Power in Regulation 4F
Where the corporate debtor has more than one real estate project, new regulation 4F requires the resolution professional to place project-wise details before the committee of creditors at its first meeting. Those details include the registration with the real estate regulator, the stage of completion, the possession and occupancy status and the unit counts.
The committee may then recommend that a project be excluded from the process. The recommendation needs a vote of not less than sixty-six per cent of voting share and the reasons have to be recorded. The resolution professional then applies to the Adjudicating Authority, annexing those reasons.
Two features of that design deserve attention. The committee recommends and does not decide, so the exclusion takes effect only on an order. And the reasons are recorded at the committee stage rather than constructed later, which means the quality of the first meeting's information largely determines whether an exclusion can be supported at all.
Money Is Now Separated by Project
Substituted regulation 4D requires a separate bank account to be operated for each real estate project. The resolution professional must give the committee project-wise statements of receipts and payments at the intervals the committee sets, and must ensure that the fund utilisation requirements under the real estate legislation are met for every project.
This is the provision that makes the rest workable. A project cannot sensibly be excluded from a process, or costed, or handed over, if its receipts have been pooled with those of every other project in the same company.
A Technical and Cost-to-Complete Assessment Before Bidding
New regulation 4G requires the resolution professional, with the prior approval of the committee, to appoint independent and suitably qualified professionals to carry out a project-wise technical and cost-to-complete assessment. It covers construction status and the percentage of completion, approvals and compliances, the inventory of sold and unsold units, the cost to complete, milestone funding needs, realistic timelines and material risks.
The timing is the operative part. The assessment must be obtained before the expression of interest is issued under regulation 36A, must be included in the information memorandum and made available to prospective resolution applicants, and its cost forms part of the insolvency resolution process costs.
So the sequence is reversed from the usual one. Bidders are to be given an independent view of what each project will cost to finish before they are asked to express interest, rather than discovering it during diligence.
What a Resolution Plan Must Now Contain
Substituted regulation 38A requires every resolution plan for a corporate debtor with any real estate project to carry project-wise details of units sanctioned, constructed and under construction, split between sold and unsold. It must address the treatment of allottee claims, including the claims of allottees who have not come forward.
It must also set completion and possession timelines project, phase or tower wise as applicable, and provide for periodic progress reporting to the monitoring committee. The monitoring committee for such a debtor is to include the authorised representative of the class of allottees, and a representative of the real estate regulator and of the competent authority where applicable and willing.
Possession During the Process
An Explanation inserted to regulation 4E records that the committee may approve each individual request for handover of possession, or may give the resolution professional an in-principle approval that lets it process all such requests as they come in.
The in-principle route is the practical one, because handover requests arrive continuously and a committee that has to meet for each of them will not keep up. The choice between the two is a decision the committee should take deliberately and record, not one to be left to practice.
What the Package Does Not Do
It does not create a separate insolvency process for a project. The corporate debtor remains the entity in the process, and what the regulations do is require the process to be run and reported project by project and permit a project to be taken out of it by order.
Nor does it displace the real estate legislation. Regulation 4D preserves the fund utilisation requirements under that legislation during the process, which means the two regimes are to be operated together rather than one giving way to the other.
Key Takeaways
The instrument is of October 30, 2026: Notification No. IBBI/2026-27/GN/REG155, made under clauses (aa) and (t) of sub-section (1) of section 196 read with section 240 of the Code.
A project can now be taken out of the process: Regulation 4F permits the committee to recommend exclusion by not less than sixty-six per cent of voting share, with reasons recorded, followed by an application to the Adjudicating Authority.
The first meeting carries the weight: Project-wise details including registration, stage of completion, possession and occupancy status and unit counts go before the committee at its first meeting.
Each project gets its own bank account: Substituted regulation 4D, with project-wise statements of receipts and payments to the committee and compliance with fund utilisation requirements.
Bidders get an independent costing first: Regulation 4G requires a technical and cost-to-complete assessment before the expression of interest is issued under regulation 36A, included in the information memorandum, its cost being a process cost.
Resolution plans must be project-wise: Substituted regulation 38A requires unit details split between sold and unsold, treatment of allottee claims including those not submitted, and project, phase or tower wise timelines with periodic progress reporting.
The monitoring committee changes shape: It is to include the authorised representative of the class of allottees and a representative of the real estate regulator and the competent authority where applicable and willing.
Possession can be handled in principle: The Explanation to regulation 4E allows an in-principle approval covering all handover requests rather than individual approvals.
Key Statutory Provisions
Section 196 of the Insolvency and Bankruptcy Code, 2016: Powers and functions of the Board, exercised subject to the general direction of the Central Government. Clause (aa) of sub-section (1) covers the development and regulation of the working and practices of service providers, and clause (t) the making of regulations and guidelines on matters relating to insolvency and bankruptcy. Both are relied on in the preamble to the amendment.
Section 240 of the Code: The Board's power to make regulations, read with section 196 in the preamble to the amendment.
Sources and References
The Board's own listing of the amendment and the companion items of the same date
The amendment, with the text of regulations 4D to 4G and 38A
Analysis of the same amendment, with the voting threshold and the assessment
Insolvency and Bankruptcy Code, 2016, sections 196 and 240, and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, regulations 4D to 4G, 36A and 38A
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
Comments