Project-Wise Real Estate Insolvency: Rights of Homebuyers Under the IBC

Project-Wise Real Estate Insolvency: Rights of Homebuyers Under the IBC

Abstract

Real-estate insolvency presents a difficult question under the Insolvency and Bankruptcy Code, 2016 (IBC): when a developer owns several projects, should insolvency proceedings affect the entire corporate debtor or remain confined to the project connected with the default? The question is particularly important for homebuyers because a company-wide insolvency process may expose otherwise viable projects and their allottees to the consequences of a financial default arising from another project.

The legal position has developed through the interaction of the IBC, the Real Estate (Regulation and Development) Act, 2016 (RERA), insolvency regulations and judicial decisions. The Supreme Court’s decision in Mansi Brar Fernandes v. Shubha Sharma & Anr., 2025 INSC 1110, expressly stated that resolution of real-estate insolvency should, as a rule, proceed on a project-specific basis rather than against the entire corporate debtor, unless circumstances justify otherwise. Subsequent NCLAT decisions in 2025 and 2026 have applied this principle to particular financing arrangements, security documents and project structures.

This article examines whether project-wise CIRP adequately protects homebuyers in unrelated projects, when company-wide treatment may still be justified, and how the 2026 regulatory and legislative developments affect the position.

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1. Introduction

The IBC was primarily designed around the insolvency of a corporate debtor as an entity. Real-estate companies, however, frequently operate several projects simultaneously. One company may develop different residential or commercial projects in different cities, with separate approvals, land arrangements, financing structures, bank accounts and groups of homebuyers.

This creates a practical conflict. If a financial creditor initiates CIRP because of a default connected with one project, bringing every project of the company within the insolvency process may affect homebuyers who have no connection with that default. A financially healthy project may therefore become exposed to liabilities arising from a completely different project.

The problem is especially significant because homebuyers are not ordinary trade creditors. Under Section 5(8)(f) of the IBC, read with its Explanation, amounts raised from an allottee under a real-estate project are treated as having the commercial effect of borrowing. Homebuyers therefore fall within the statutory framework of financial creditors, subject to the requirements of the Code. The Supreme Court recognised the distinct position of real-estate allottees in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416.

The central issue is consequently not merely whether the corporate debtor has committed a default. It is also whether the insolvency process should affect projects and stakeholders that are legally and economically unconnected with that default.

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2. Research Question

The principal question considered in this article is:

When a real-estate developer owns multiple projects, should CIRP be confined to the project connected with the underlying financial debt and default, or can it extend to the corporate debtor’s other projects? What protection does the law provide to homebuyers in those different projects?

The issue involves three connected considerations:

1. the corporate-debtor-centric structure of the IBC;

2. the project-based regulatory structure under RERA; and

3. the judicial development of project-wise insolvency in real-estate cases.

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3. Statutory Framework

3.1 Section 5(8)(f) of the IBC: Homebuyers as Financial Creditors

Section 5(8) defines “financial debt”. Clause (f) covers amounts raised under transactions having the commercial effect of borrowing, and its Explanation specifically provides that an amount raised from an allottee under a real-estate project is deemed to have the commercial effect of borrowing.

This provision brought homebuyers into the financial-creditor structure of the IBC. In Pioneer Urban Land and Infrastructure Ltd. v. Union of India, the Supreme Court upheld the constitutional validity of treating real-estate allottees as financial creditors. The Court emphasised the time value of money and the distinctive relationship between a homebuyer and a real-estate developer.

Consequently, a genuine homebuyer may participate in CIRP and, subject to the statutory requirements, may invoke Section 7.

3.2 Section 7: Initiation of CIRP

Section 7 permits a financial creditor to initiate CIRP upon default. In the case of real-estate allottees, however, the Code imposes a special threshold.

The proviso to Section 7(1) requires an application by at least 100 allottees under the same real-estate project or 10% of the total number of such allottees under that project, whichever is less.

The Supreme Court upheld the constitutional validity of this threshold in Manish Kumar v. Union of India, (2021) 5 SCC 1. The requirement is intended to prevent an isolated set of homebuyers from independently triggering insolvency proceedings against a developer.

The project-specific wording of the threshold is particularly relevant to the present issue because it recognises the distinct identity of allottees associated with a particular project.

3.3 Section 21(6A): Representation of Homebuyers

Homebuyers generally constitute a large class of creditors. Section 21(6A) provides for representation of creditors in a class through an authorised representative in the Committee of Creditors.

This mechanism attempts to ensure that the interests of numerous allottees can be represented collectively rather than requiring every individual homebuyer to participate separately in the CoC.

3.4 Sections 30 and 31: Resolution Plan

Section 30 deals with the submission and contents of a resolution plan, while Section 31 concerns approval of the plan by the Adjudicating Authority.

For real-estate insolvency, the practical objective is not necessarily to sell the entire corporate debtor as a single package. The resolution process may need to preserve viable projects, protect project-specific cash flows and enable completion for homebuyers.

This approach is reinforced by the clarification inserted in Regulation 36A(1) of the CIRP Regulations with effect from 15 February 2024, under which the Resolution Professional, after approval of the CoC, may invite a resolution plan for each real-estate project or group of projects of the corporate debtor.

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4. RERA and the Project-Based Nature of Real Estate

RERA regulates real-estate projects through project-specific registration and disclosure requirements. Sections 3 and 4 concern registration of projects and applications for registration, while Sections 11, 18 and 19 deal with promoter obligations, remedies for delay and rights and duties of allottees.

This project-based structure is important in insolvency because homebuyers ordinarily invest in a particular identified project rather than in the corporate debtor’s business as a whole.

The existence of separate RERA registrations, approvals, project accounts, land arrangements and financing documents can therefore provide important factual evidence when a tribunal determines whether CIRP should extend beyond the project connected with the default.

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5. Judicial Development

5.1 Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd.

The NCLAT’s decision dated 4 February 2020 in Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 926 of 2019, is an important early development.

The Tribunal dealt with the Winter Hills-77 project and adopted an innovative “reverse CIRP” mechanism aimed at completing the project and protecting its allottees. It observed that where a real-estate company has separate projects with separate approved plans, the CIRP concerning one project should not automatically affect unrelated projects.

The decision became an important foundation for later project-wise treatment of real-estate insolvency.

5.2 Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishore Arora

In Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishore Arora & Ors., Civil Appeal No. 1925 of 2023 and connected matters, the Supreme Court on 11 May 2023 dealt with challenges arising from the Supertech insolvency proceedings.

The NCLAT had directed project-wise resolution in relation to Eco Village-II and the Supreme Court did not interfere with that approach at that stage. The case is significant because it demonstrated that project-wise resolution could operate within the existing insolvency framework in appropriate circumstances.

5.3 Mansi Brar Fernandes v. Shubha Sharma

The most significant recent development is the Supreme Court’s judgment in Mansi Brar Fernandes v. Shubha Sharma & Anr., 2025 INSC 1110, decided on 12 September 2025.

The case primarily concerned the distinction between genuine homebuyers and speculative investors and the circumstances in which a Section 7 application by an allottee may be maintained. The Court also issued wider directions concerning real-estate insolvency.

Most importantly for the present issue, paragraph 21.2(6) states:

«“Resolution of real estate insolvency should, as a rule, proceed on a project-specific basis rather than the entire corporate debtor, unless circumstances justify otherwise.”»

The Court linked this approach with the protection of solvent projects and genuine homebuyers from collateral prejudice. It also directed the IBBI, in consultation with RERA authorities, to frame specific guidelines for real-estate insolvency, including timelines for project-wise CIRP and safeguards for allottees.

This is a Supreme Court formulation and therefore must be distinguished from later NCLAT decisions that apply the principle to individual factual situations.

The phrase “unless circumstances justify otherwise” is particularly important. The judgment does not establish that every real-estate CIRP must invariably be restricted to a single project.

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6. Subsequent NCLAT Developments

6.1 Amit Jain v. IDBI Trusteeship Services Ltd.

In Amit Jain v. IDBI Trusteeship Services Ltd. & Anr., Company Appeal (AT) (Insolvency) No. 1186 of 2025 and connected matters, decided on 6 November 2025, the NCLAT considered the insolvency of Mahagun (India) Pvt. Ltd.

The financing documents relied upon by IDBI Trusteeship Services were connected with the Mahagun Manorial project. The NCLAT noted the Supreme Court’s subsequent decision in Mansi Brar Fernandes and directed reconsideration of the Section 7 proceedings after taking into account the status of the corporate debtor’s other projects and the Supreme Court’s project-specific principle.

The case is therefore useful for demonstrating that the financing and security documents may be central to determining the appropriate scope of CIRP.

6.2 Gagan Tondon v. IL&FS Financial Services Ltd.

In Gagan Tondon & Ors. v. IL&FS Financial Services Ltd. & Ors., Company Appeal (AT) (Insolvency) Nos. 500 and 502 of 2025, decided on 7 January 2026, the corporate debtor, Ansal Properties and Infrastructure Ltd., had projects in different cities and States.

The NCLAT examined the loan agreements and the securities furnished for the IL&FS facilities. It concluded that the CIRP should not engulf projects having no connection with the relevant financial facilities. The Tribunal confined the CIRP to specified projects and assets connected with the relevant loan and security arrangements and directed that project-wise resolution be considered.

This decision is important because it shows that project-wise insolvency is not determined simply by looking at the corporate name. The financing documents, security package and connection between the debt and the projects matter.

6.3 Surender Singh v. IDBI Trusteeship Services Ltd.

In Surender Singh, Suspended Director of Vatika Ltd. v. IDBI Trusteeship Services Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 266 of 2026, decided on 27 March 2026, the NCLAT dealt with financing connected with Project Aspirations, Sector 88B, Gurgaon.

The Tribunal upheld the initiation of CIRP but modified its scope so that the CIRP was confined to Project Aspirations. It expressly permitted financial creditors and other creditors connected with other projects to pursue remedies available under law.

This is a particularly clear example of the practical operation of project-wise insolvency after Mansi Brar Fernandes.

6.4 Navin M. Raheja v. Shravan Minocha & Ors.

In Navin M. Raheja v. Shravan Minocha & Ors., Company Appeal (AT) (Insolvency) No. 1276 of 2025, decided on 10 April 2026, Section 7 proceedings were initiated by homebuyers belonging to the Raheja Krishna Housing Scheme.

The NCLAT modified the admission order and confined CIRP to the Krishna Housing Scheme. It directed the IRP/RP to invite claims relating to that project and clarified that stakeholders concerning other projects remained free to pursue their proceedings in accordance with law.

The significance of Navin M. Raheja is therefore specific: it demonstrates the application of the project-wise principle where the Section 7 applicants themselves belonged to one identifiable project and the default concerned that project.

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7. Project-Wise Versus Company-Wide CIRP

Issue| Project-Wise CIRP| Company-Wide CIRP

Basic approach| Focuses on the affected project| Covers the corporate debtor more broadly

Relevance of security| Project and security connection becomes important| Wider security or interdependence may justify broader treatment

Other viable projects| Ordinarily protected from collateral impact| May be affected where projects, assets or liabilities are materially interconnected

Homebuyers| Primarily concerned with their particular project| Stakeholders across multiple projects may become involved

Judicial position| Recognised as the general approach in appropriate real-estate insolvency cases| Possible where circumstances justify wider treatment

Important authority| Mansi Brar Fernandes and subsequent NCLAT applications| The exception recognised within Mansi Brar Fernandes

The comparison demonstrates why the issue cannot be resolved merely by asking whether the same corporate entity owns several projects.

The real legal test, therefore, is not simply:

“Is the company insolvent?”

It is increasingly:

“Which projects, assets, liabilities and stakeholders are economically and legally connected with the default that triggered CIRP?”

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8. When Company-Wide CIRP May Still Be Justified

Project-wise treatment is not an absolute rule.

The Supreme Court expressly qualified its project-specific direction by the words “unless circumstances justify otherwise.”

A wider CIRP may therefore become relevant where, depending on the facts:

– the relevant financing is secured against several projects;

– the same assets or receivables support multiple projects;

– project funds and liabilities are materially interlinked;

– there is substantial common security across projects;

– the corporate debtor’s assets cannot realistically be separated;

– excluding other projects would prejudice the legitimate interests of creditors; or

– the overall resolution structure requires consideration of interconnected projects.

The decision in Gagan Tondon illustrates the importance of examining the actual loan and security documents. The NCLAT did not simply treat all projects of Ansal Properties alike; it examined which projects and assets were connected with the relevant facilities.

Thus, project-wise insolvency should not be understood as a formula based solely on the number of projects. It is a fact-sensitive legal determination.

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9. The 2026 IBBI Committee Report and Regulatory Development

Following the Supreme Court’s directions in Mansi Brar Fernandes, the IBBI constituted a committee on framing guidelines for insolvency proceedings in the real-estate sector.

The Committee submitted its report to the IBBI Chairperson on 7 April 2026. According to the IBBI, the Committee examined 55 key issues and made 155 recommendations. It identified the need for a shift from an entity-centric, recovery-focused approach towards a more project-centric and completion-driven approach, with greater coordination between the IBC and RERA.

These recommendations are highly relevant to the future development of real-estate insolvency.

However, a committee report is not itself a statutory amendment or binding regulation. Its recommendations must be distinguished from provisions of the IBC, rules, regulations, notifications and binding judicial decisions.

Therefore, the 2026 Committee Report should be treated as an important regulatory-policy development, rather than as an independent source of binding law.

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10. Position Under the IBC (Amendment) Act, 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received Presidential assent on 6 April 2026 and was enacted as Act No. 6 of 2026. Section 1(2) provides that different provisions may come into force on different dates as appointed by the Central Government.

This distinction is important.

The Central Government subsequently notified 26 May 2026 as the commencement date for a substantial list of provisions of the Amendment Act through Notification S.O. 2625(E) dated 22 May 2026. The notification covers, among other provisions, Sections 2–6, 8–33, specified portions of Section 34, Sections 35–39, 41, 43–44, 46, 48–59, 61–66, 68 and specified portions of Sections 69 and 70 and Section 72 of the Amendment Act.

Accordingly, as of the research cut-off date of 2 October 2026, the correct position is not that the 2026 Amendment Act is merely awaiting commencement. Rather, specified provisions have been brought into force from 26 May 2026, while other provisions remain dependent on separate commencement notification.

Therefore, whenever an amendment under the 2026 Act is relied upon, the specific provision and its commencement notification must be checked before treating it as operative law.

This distinction is particularly important for legal research because the Amendment Act contains several structural reforms whose commencement is not necessarily simultaneous.

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11. Rights and Practical Concerns of Homebuyers

For homebuyers, project-wise insolvency can provide an important degree of protection where their project is financially viable but another project of the same developer has defaulted.

The principal concerns are:

11.1 Protection of Unrelated Projects

A homebuyer in a financially healthy project has a legitimate interest in ensuring that the assets and cash flows of that project are not unnecessarily diverted towards liabilities arising from an unrelated project.

11.2 Completion Rather Than Mere Recovery

The primary objective of many homebuyers is possession and completion of the project rather than liquidation and monetary recovery. This makes project-wise resolution particularly relevant in cases where construction can still be completed.

11.3 Protection of Project-Specific Security

Where a financial creditor financed one project and its security is restricted to assets of that project, the financing documents may provide an important basis for limiting the practical impact of CIRP.

11.4 Participation in CIRP

Homebuyers who qualify as financial creditors remain stakeholders in the insolvency process. Their claims must be dealt with under the IBC and applicable regulations, and creditors in a class may participate through their authorised representative.

11.5 Remedies Under RERA

Project-wise insolvency does not erase the statutory remedies available under RERA. Depending upon the circumstances, allottees may have remedies relating to delay, refund, interest, compensation and possession.

The interaction between RERA and IBC therefore remains important. The two statutes serve different functions, and the existence of an insolvency proceeding does not automatically make every RERA remedy irrelevant.

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12. The Emerging Legal Position

The current position may be summarised in five propositions.

First, homebuyers are recognised as financial creditors under Section 5(8)(f) of the IBC.

Second, Section 7 contains a special threshold for homebuyer applications based on the same real-estate project.

Third, NCLAT’s earlier decision in Winter Hills and subsequent cases established practical mechanisms for project-specific resolution.

Fourth, the Supreme Court in Mansi Brar Fernandes has now expressly stated that real-estate insolvency should, as a rule, proceed on a project-specific basis unless circumstances justify otherwise.

Fifth, later NCLAT decisions such as Amit Jain, Gagan Tondon, Surender Singh and Navin M. Raheja demonstrate that the principle is being applied through a fact-specific examination of projects, financing arrangements, security documents and stakeholder interests.

Therefore, the emerging framework is neither an automatic company-wide model nor an absolute single-project rule.

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13. Conclusion

Real-estate insolvency exposes a structural difficulty within the IBC. The Code is framed around the corporate debtor, while real-estate businesses are frequently organised around multiple projects with separate land, approvals, financing arrangements, accounts and groups of homebuyers.

The judicial response has increasingly recognised this distinction.

The NCLAT’s Winter Hills decision provided an early project-specific model. The Supreme Court’s order in Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishore Arora demonstrated judicial acceptance of project-wise resolution in the Supertech context. The Supreme Court’s 2025 decision in Mansi Brar Fernandes went further by expressly stating that resolution of real-estate insolvency should, as a rule, proceed on a project-specific basis, while preserving an exception where circumstances justify broader treatment.

The 2026 NCLAT decisions show how this principle operates in practice. Gagan Tondon emphasises the relevance of financing and security documents; Surender Singh confined CIRP to Project Aspirations; and Navin M. Raheja confined CIRP to the Krishna Housing Scheme while preserving the rights of stakeholders connected with other projects.

At the same time, project-wise insolvency should not be converted into an inflexible rule. Where assets, liabilities, financing or security interests are materially interconnected, a wider insolvency process may still be justified.

The most appropriate approach is therefore a project-sensitive and fact-specific application of the IBC, balancing creditor rights, homebuyer protection, project completion and value maximisation.

For homebuyers, the central question is no longer simply whether their developer has entered insolvency. The more important question is whether the project in which they invested is legally and economically connected with the default that triggered the insolvency process.

That distinction may determine whether a viable project is protected or becomes unnecessarily affected by the financial distress of another project.

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14. Case Law Authorities

1. Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416.

2. Manish Kumar v. Union of India, (2021) 5 SCC 1.

3. Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 926 of 2019, decided on 4 February 2020.

4. Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishore Arora & Ors., Civil Appeal No. 1925 of 2023 and connected matters, order dated 11 May 2023.

5. Mansi Brar Fernandes v. Shubha Sharma & Anr., 2025 INSC 1110, decided on 12 September 2025.

6. Amit Jain v. IDBI Trusteeship Services Ltd. & Anr., Company Appeal (AT) (Insolvency) No. 1186 of 2025 and connected matters, decided on 6 November 2025.

7. Gagan Tondon & Ors. v. IL&FS Financial Services Ltd. & Ors., Company Appeal (AT) (Insolvency) Nos. 500 & 502 of 2025, decided on 7 January 2026.

8. Surender Singh, Suspended Director of Vatika Ltd. v. IDBI Trusteeship Services Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 266 of 2026, decided on 27 March 2026.

9. Navin M. Raheja v. Shravan Minocha & Ors., Company Appeal (AT) (Insolvency) No. 1276 of 2025, decided on 10 April 2026.

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15. Frequently Asked Questions

Q1. Can a homebuyer initiate insolvency proceedings against a real-estate developer?

Yes, a qualifying homebuyer is treated as a financial creditor under Section 5(8)(f) of the IBC. However, homebuyer applications under Section 7 are subject to the statutory threshold requiring the specified minimum number or percentage of allottees of the same project. The Supreme Court upheld this threshold in Manish Kumar v. Union of India.

Q2. Does insolvency of one project automatically affect all projects of the developer?

No. The current judicial position recognises project-specific treatment in appropriate real-estate insolvency cases. In Mansi Brar Fernandes, the Supreme Court stated that resolution should, as a rule, proceed on a project-specific basis unless circumstances justify otherwise. Later NCLAT decisions have applied this principle according to the particular financing and security structure.

Q3. Can a company-wide CIRP still be justified?

Yes. The Supreme Court’s formulation itself contains the qualification “unless circumstances justify otherwise”. Where projects or their assets, liabilities, financing or security interests are materially interconnected, a broader approach may be considered on the facts of the case.

Q4. What protection does a homebuyer in an unrelated project have?

A homebuyer in an unrelated project can place before the Adjudicating Authority the relevant project documents, RERA registration, financing arrangements, security documents and evidence showing that the project is distinct from the defaulting project. Recent NCLAT decisions demonstrate that stakeholders of other projects may retain liberty to pursue remedies available in law when CIRP is confined to a particular project.

Q5. Is the 2026 IBC Amendment Act completely applicable as of October 2026?

No single commencement date should be assumed for the entire Amendment Act. The Act received Presidential assent on 6 April 2026, but the Central Government brought specified provisions into force from 26 May 2026 through Notification S.O. 2625(E). Therefore, the particular provision being relied upon must be checked against the applicable commencement notification.

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Research Links

Supreme Court — Mansi Brar Fernandes v. Shubha Sharma & Anr.

“Judgment — 2025 INSC 1110” (https://reference-url-citation.invalid/24)

NCLAT — Gagan Tondon v. IL&FS Financial Services Ltd.

“Judgment — 7 January 2026” (https://reference-url-citation.invalid/25)

NCLAT — Surender Singh v. IDBI Trusteeship Services Ltd.

“Judgment — 27 March 2026” (https://reference-url-citation.invalid/26)

NCLAT — Navin M. Raheja v. Shravan Minocha & Ors.

“Judgment — 10 April 2026” (https://reference-url-citation.invalid/27)

NCLAT — Amit Jain v. IDBI Trusteeship Services Ltd.

“Judgment — 6 November 2025” (https://reference-url-citation.invalid/28)

NCLAT — Flat Buyers Association Winter Hills-77 v. Umang Realtech Pvt. Ltd.

“Judgment — 4 February 2020” (https://reference-url-citation.invalid/29)

Supreme Court — Indiabulls ARC v. Ram Kishore Arora

“Supreme Court Order — 11 May 2023” (https://reference-url-citation.invalid/30)

IBBI — 2026 Committee Report on Real-Estate Insolvency

“IBBI Committee Report / Press Release” (https://reference-url-citation.invalid/31)

IBBI — IBC (Amendment) Act, 2026

“Official IBBI Legal Framework” (https://reference-url-citation.invalid/32)

NCLT — Acts, Rules and 2026 Amendment Enforcement Notification

“NCLT Legal Framework” (https://reference-url-citation.invalid/33)