Insolvency regulator IBBI has given a boost to the real estate sector with the introduction of the concept of ‘project-wise’ resolutions in the real estate insolvency cases.

It has now amended its Corporate Insolvency Resolution Process (CIRP) regulations to empower the Committee of Creditors (CoC) to direct the Resolution Professional (RP) to invite separate resolution plan for each project.

The Insolvency and Bankruptcy Board of India (IBBI) has also mandated that the IRP/RP should maintain separate bank accounts for each real estate project when the corporate debtor is involved in real estate development. 

India’s real estate sector accounts for about 7 per cent share of country’s GDP (estimated at $ 3.5 trillion) and is expected to touch level of $ 1 trillion by 2030.

This flexibility in inviting resolution plans in real-estate cases has been provided with a view that each project in a real estate case may need different treatment in terms of resolution.

IBBI had in January 2021 sought public comments on measures that may be needed to improve outcomes in real estate cases.

It was then observed there are situations where because of the default in one project, the CIRP is initiated against the entire company. This is counterproductive as other solvent projects are also stalled post-commencement. In real estate cases, the default often pertains to specific projects (while other projects continue to do well).

Amended dispensation

Meanwhile, under the amended dispensation, the RP has been mandated to convene a CoC meeting at least once in every 30 days, with a provision to extend the interval between meetings to a maximum of one meeting per quarter, if CoC so decides.

To enhance the oversight of the CoC over going concern costs, the amendment provides that the RP must seek approval from the CoC for all costs including going concern costs related to the insolvency resolution process.

With an aim to increase transparency and reduce disputes over valuation related issues, the amendment provides for explaining the valuation methodology to the members of the CoC before the computation of estimates.

For fostering informed participation in the process, the amendment provides that the fair value may be made part of the information memorandum (IM). 


Hari Hara Mishra, CEO, Association of ARCs in India, said that one third of all cases admitted under IBC, relate to real estate and construction sector. 

To improve resolution outcome, Amitabh Kant Committee on stalled real estate projects  had recommended project wise resolution plans,  as the prospective resolution applicant can pick and choose projects based on his risk appetite, he added.

Sushmita Gandhi, Partner, IndusLaw, said that mandating separate bank account for each real estate project would definitely prove to be beneficial for streamlining the CIRP during project wise insolvency.

Anoop Rawat, Partner, Shardul Amarchand Mangaldas & Co, said that IBBI has yet again proved that it is a dynamic regulator. Many operational difficulties have been resolved in the latest amendments.

The key changes include removing the comingling of funds in real estate projects by prescribing separate bank accounts for real estate projects and allowing CoC to invite resolution plan for each project, Rawat added.

Anjali Jain Partner - Insolvency & Restructuring Practice at Areness - a law firm, said: “Out of total CIRPs initiated till date, real estate sector has 21 per cent of the share in the pool and further study of data would indicate that the proportion of real estate companies heading for liquidation (18 per cent) is proportionately more than what could be resolved (15 per cent) under the Code”. This signified the utter need to bring synchronization of the IBC process with real estate sector, she added.