Across India, thousands of homebuyers are paying EMIs on flats that stand half-built. They have paid most of the price from hard-earned savings, and the project has stopped mid-way.
Two laws now govern what happens next: the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Insolvency and Bankruptcy Code, 2016 (IBC). Neither was designed with the other in mind. This piece explains how stalled projects reach insolvency, why reviving them is harder than it looks, and what a resolution plan needs to actually deliver homes.
How Projects Stall
Indian real estate is built largely by local developers who are not listed on any stock exchange. They acquire land from farmers or, more often, take allotments from a state Development Authority. They get maps sanctioned under the Authority’s bye-laws, then build and sell residential and commercial units.
The funding model in a typical project runs on three sources:
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Promoter’s own capital, usually the smallest share
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Bank finance and other debt
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Instalments paid by homebuyers, often the largest share
When money raised for one project is diverted to another project or to buy more land, the original project runs short. Costs and timelines overrun, debt servicing defaults follow, and construction stops. The homebuyers, who funded much of the work, are left with neither a home nor their money.
Two Laws, One Problem
RERA was enacted in 2016 to regulate this largely unorganised sector. It requires every project to be registered, and requires 70% of the money collected from allottees to be kept in a separate project account and used only for that project. It also fixes declared timelines, provides a forum for homebuyer grievances, and prescribes a model agreement for sale. Enforcement rests with state authorities, and its strength varies widely from state to state.
The IBC, also enacted in 2016, was designed for the time-bound resolution of insolvent companies. Real estate companies that defaulted on bank debt were always within its reach. The real shift came in 2018, when an amendment treated amounts raised from allottees as “financial debt”. The Supreme Court upheld this in Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019). Homebuyers became financial creditors, with a seat and a vote in the Committee of Creditors.
To stop a few dissatisfied buyers from pushing an otherwise solvent developer into insolvency, a 2020 amendment added a further threshold. An application by allottees must now be filed by at least 100 allottees or 10% of the allottees in the same project, whichever is less. This sits alongside the general default threshold of ₹1 crore. The Supreme Court upheld the allottee threshold in Manish Kumar v. Union of India (2021).
Today, therefore, RERA and the IBC run side by side over the same stalled projects.
The Mismatch: Companies versus Projects
The IBC works at the level of the company, while RERA works at the level of the project. That gap is the first practical obstacle.
A developer often runs several projects at once. Some are on schedule, others have slipped. Pushing the entire company into insolvency because one project failed can freeze the healthy projects too, and harm buyers who had no complaint.
The tribunals have responded by narrowing the process to the project in default. In Flat Buyers Association Winter Hills v. Umang Realtech (2020), the NCLAT approved a “reverse CIRP”, in which the promoter itself funds completion under the tribunal’s supervision. In the Supertech matter (2022), the NCLAT confined the insolvency process to the defaulting projects and let other projects continue. The company is declared in default, but resolution is sought project by project.
The regulator is now working to make this approach the norm. In Mansi Brar Fernandes v. Shubha Sharma (2025), the Supreme Court directed the IBBI to frame sector-specific guidelines for real estate insolvency in consultation with the RERAs. The IBBI then constituted the Committee on Framing Guidelines for Insolvency Proceedings in the Real Estate Sector, chaired by Shri Jayanti Prasad, Whole Time Member, which submitted its report on 7 April 2026.
The report is built on the synergy between the IBC and RERA. It recommends treating each project as a distinct economic unit for both admission and resolution, with company-wide insolvency reserved for exceptional cases such as fraud or commingled funds. It also calls for a formal mechanism of coordination with RERA authorities, and for development authorities to have a role in monitoring the process. In June 2026, the IBBI followed up with a discussion paper proposing amendments to the CIRP Regulations. Readers wanting the detail should read the full Committee report on the IBBI website.
Where the Real Difficulty Lies
Project-wise resolution is the right idea, but three problems make it hard to carry out.
Records rarely exist at project level. Most developers keep accounts for the company as a whole, not project by project. Debt is often raised by the company and spread across sites. RERA’s project accounts were meant to fix this, but enforcement has been patchy. A resolution professional often has to rebuild each project’s money trail from scratch.
Land authority dues can decide the deal. The Development Authority that allotted the land is usually owed premium, lease rent and other charges, with heavy interest and penalties. It also holds the power to cancel the allotment. In principle, an approved resolution plan extinguishes claims it does not provide for. In practice, authorities contest plans vigorously. In Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, the Supreme Court sent an approved plan back so the authority’s objections could be considered. How a plan treats authority dues is often the single largest variable in its viability.
Homebuyers control the outcome but are hard to organise. In a real estate insolvency, allottees usually hold most of the votes in the Committee of Creditors. Yet they are spread across cities, have little time, and are rarely equipped to assess the legal and financial diligence behind a resolution plan. Where one developer has several projects, buyers from different projects may want different things.
What a Workable Resolution Plan Needs
A stalled project is revived only when its numbers close and someone credible can build it. In our experience, plans that succeed get five things right.
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Honest project economics. The test is simple: the cost to complete, plus authority dues and insolvency costs, must be covered by the balance receivable from existing buyers, the value of unsold inventory, and any unused development rights.
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A clear position on authority dues. This means a settled amount, a payment schedule, and a plan that can survive the authority’s objections, not one that assumes they will disappear.
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A builder with a delivery record. Capital alone does not lay bricks. Committees rightly favour applicants who bring proven construction capacity, either in-house or through a committed development partner.
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Ring-fenced cash. Funds for the project stay in the project, with independent monitoring, so the failure that caused the insolvency is not repeated.
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A realistic, staged handover. Buyers will vote for dated milestones they can verify. They will not vote for promises they have heard before.
The Way Ahead
The difficulty of these cases is also what creates the opportunity. Stalled projects come to the table at a resolution cost well below what a fresh project would need. The land is allotted, approvals exist, part of the structure stands, and buyers are waiting to pay their balances.
Policy is moving in the same direction. The Union Government’s SWAMIH fund was set up to provide last-mile finance for stalled housing. Some states have also offered relief on legacy authority dues to unlock stuck projects.
The resolution applicants who succeed will be those who combine financial discipline with execution capacity, and who engage with homebuyers openly, with verifiable timelines. For homebuyers, the lesson is just as clear. Organise early, take informed advice, and judge every plan on whether it can actually be delivered.
This article is for general information only and is not legal advice. Each case turns on its own facts.