IBC Amendment Act 2026 and Real Estate Insolvency: Project-Wise Resolution, Homebuyer Safeguards, and the IBBI Discussion Paper

The Insolvency and Bankruptcy Code (Amendment) Act, 2026, which received Presidential assent on 6 April 2026 and came into force on 25 May 2026, introduces sweeping changes to India's insolvency framework. Among the most consequential reforms are those targeting the real estate sector, where the conventional entity-level CIRP had long struggled with the reality that developers operate multiple projects with distinct financing, approvals, and stakeholders.

Complementing these legislative changes, the IBBI released a Discussion Paper on 30 June 2026 titled "Strengthening Resolution Outcomes in Real Estate Insolvency," proposing detailed regulatory amendments to the CIRP Regulations, 2016. Together, the Amendment Act and the Discussion Paper represent the most comprehensive overhaul of real estate insolvency in India since the Code's enactment.

Judicial Foundation: From Entity-Level to Project-Wise Resolution

The Amendment Act codifies principles that Indian courts developed over several years. In Chitra Sharma v. Union of India, (2018) 18 SCC 575, the Supreme Court invoked Article 142 to reconstitute the Committee of Creditors (CoC) to include homebuyers, laying the foundation for their recognition as financial creditors. Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416, upheld the constitutional validity of this classification.

The landmark Amrapali decision in Bikram Chatterji v. Union of India, (2019) 19 SCC 161, established the principle of "homebuyer paramountcy," holding that allottees' rights to possession prevailed over those of secured banks and development authorities. The NCLAT in Flat Buyers Association v. Umang Realtech, (2020) 12 Comp Cas-OL 174, formally introduced the concepts of project-wise CIRP and Reverse CIRP. Most recently, in Indiabulls ARC Ltd. v. Ram Kishore Arora (the Supertech case), 2023 SCC OnLine SC 612, the Supreme Court endorsed project-wise resolution while keeping the broader doctrinal question open.

Key Amendments in the IBC Amendment Act 2026

Asset-Level Resolution Plans (Section 5(26))

The amended definition of "resolution plan" now expressly permits the sale of one or more assets of the corporate debtor through one or multiple plans submitted by different resolution applicants. For real estate developers with a portfolio of projects, this means each project can attract its own resolution applicant with a tailored completion strategy. A viable housing project in one city need not be dragged down by an unviable commercial development in another.

Expanded Duty to Cooperate (Section 19(1))

The statutory obligation to cooperate with the Interim Resolution Professional (IRP) or Resolution Professional (RP) now extends beyond the erstwhile promoters to include persons engaged under contracts for service. This covers architects, engineering consultants, contractors, and project managers. In practice, this provision is critical for real estate CIRP because project completion depends on coordinated participation by these external stakeholders, and their refusal to cooperate had been a recurring obstacle.

Continuity of Statutory Approvals (Section 31(5))

A new sub-section preserves governmental and regulatory approvals post-resolution. Any licence, permit, RERA registration, building plan approval, fire safety NoC, or utility connection linked to the approved resolution plan cannot be suspended or terminated for the remaining duration of the grant, provided the successful resolution applicant continues to meet the conditions. This eliminates a major risk that had previously deterred potential resolution applicants from bidding for real estate projects.

Clean Slate Principle Codified (Section 31(6))

The clean-slate doctrine, first articulated in Ghanashyam Mishra and Sons (P) Ltd. v. Edelweiss ARC Ltd., (2021) 9 SCC 657, has now been given statutory force. Upon approval of a resolution plan, all pre-approval claims against the corporate debtor and its assets stand extinguished. No fresh or continuing proceedings can be pursued. This provides certainty to resolution applicants, though the legislature will need to ensure that homebuyers' claims arising from fraud by erstwhile promoters are not inadvertently extinguished.

Creditor-Initiated Insolvency Resolution Process (Chapter IV-A)

The newly introduced CIIRP framework allows a financial creditor belonging to a notified class to initiate resolution with 51% creditor approval, after giving the corporate debtor notice to cure the default. Crucially, the CIIRP follows a debtor-in-possession model where the existing management continues to operate under RP supervision. This mirrors the concept of Reverse CIRP developed in Flat Buyers Association v. Umang Realtech, where the promoter infused funds as an external financier rather than being displaced.

IBBI Discussion Paper: Strengthening Real Estate CIRP

The IBBI Discussion Paper of 30 June 2026 proposes amendments to the CIRP Regulations, 2016, addressing operational gaps in real estate insolvency. Public comments were invited until 21 July 2026. Key proposals include:

• Project exclusion mechanism (proposed Regulation 18B): The CoC, at its first meeting, must undertake a project-wise assessment and may exclude completed or operationally independent projects from CIRP by a 66% vote.

• Project-wise ring-fencing (proposed Regulation 4DA): The RP must maintain separate project-wise books of accounts, route all payments through project-specific bank accounts, and comply with RERA fund utilisation requirements.

• Simplified Form CA-R for homebuyers: A new allottee-specific claim form capturing unit details, financial details, preference of relief (possession, registration, refund, or other), and supporting documents.

• Mandatory cost-to-complete assessment (proposed Regulation 4F): The RP must appoint professionals to conduct a project-wise technical and cost-to-complete assessment, giving resolution applicants reliable data.

• Enhanced monitoring committees (proposed amendment to Regulation 38(4)(b)): Every monitoring committee for a real estate resolution plan must include the authorised representative of allottees and nominated representatives from RERA and the relevant land development authority.

• Anti-premature liquidation safeguards (proposed Regulation 39D): Before any liquidation proposal, the RP must present a detailed note demonstrating that all completion-oriented alternatives were exhausted.

What This Means for Stakeholders

In practice, the combined effect of the Amendment Act and the proposed IBBI regulations will reshape how real estate insolvencies are initiated, managed, and resolved. For homebuyers, the reforms promise faster possession in viable projects, better information through mandatory disclosures, and stronger voice through enhanced monitoring committees. For resolution applicants, asset-level plans and the clean-slate principle reduce acquisition risk. For financial creditors, the CIIRP offers a less disruptive alternative to full CIRP where the debtor's management is capable of executing a turnaround.

However, the success of these reforms depends on NCLT capacity and speed. The 14-day admission mandate under the amended Section 7(5) is ambitious given current tribunal workloads. The Supreme Court itself, in GLAS Trust Company LLC v. BYJU Raveendran, (2025) 3 SCC 625, stressed that the IBC's procedural framework must be strictly followed rather than circumvented through inherent powers.

Sources and References

• Insolvency and Bankruptcy Code (Amendment) Act, 2026, No. 6 of 2026

• MCA Notification S.O. 2625(E), dated 22 May 2026 (bringing the Amendment Act into force)

• IBBI Discussion Paper, "Strengthening Resolution Outcomes in Real Estate Insolvency," dated 30 June 2026

• Argus Partners analysis, "A New Era for Real Estate Insolvency: IBC (Amendment Act) 2026 and the IBBI Discussion Paper," Mondaq, 10 August 2026

• Chitra Sharma v. Union of India, (2018) 18 SCC 575; Pioneer Urban v. Union of India, (2019) 8 SCC 416; Bikram Chatterji v. Union of India, (2019) 19 SCC 161; Flat Buyers Association v. Umang Realtech, (2020) 12 Comp Cas-OL 174; Indiabulls ARC v. Ram Kishore Arora, 2023 SCC OnLine SC 612; Ghanashyam Mishra v. Edelweiss ARC, (2021) 9 SCC 657

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.